Dovish Bank of England (BoE) Prompts Strong Downtrend for Pound (GBP)
After an unexpectedly dovish Bank of England (BoE) Inflation Report, which suggested that policymakers were not anticipating an increase in interest rates potentially as late as 2017, the Pound (GBP) slumped sharply across the board. Thus, in spite of Eurozone data remaining generally disappointing, the EUR/GBP exchange rate is on an uptrend this morning in the region of 0.7168.
Sentiment towards the Euro (EUR) is experiencing a slight uptick this morning, despite German Factory Orders unexpectedly slumping on the month in September.
Volkswagen Emissions Admission set EUR/GBP Exchange Rate on Downtrend, Pound (GBP) Bullish on Strong UK Services PMI
Fresh developments in the Volkswagen emissions scandal have weighed on the Euro (EUR) this week, with shares in the German automobile company entering a fresh slump as investor confidence is dented further. After US regulators accused the company of having installed ‘defeat devices’ on a number of additional models, including Audi and Porsche vehicles, the carmaker admitted that 800,000 cars were affected by inaccurate carbon dioxide emission and fuel consumption readings. With the problems thought to now affect some petrol models this news dealt another blow to faith in Volkswagen, as traders were unimpressed by the thought of further fines and recalls.
Giving a boost to the Pound (GBP), meanwhile, was the news that the UK’s Services PMI had risen above estimates, printing at a solid 54.9. Suggesting that the domestic economy remains in a state of recovery, with sector expansion continuing at a good pace, this led to speculation that the Bank of England (BoE) might be prompted to take a more hawkish tone at Thursday’s policy meeting. As a result, Sterling went on a bullish run which saw the EUR/GBP exchange rate retreat further.
Euro Currency News: EUR on Narrow Uptrend in spite of Weakening German Factory Orders
Despite an unanticipated slump in German Factory Orders this morning, which defied expectations of a slight rise to instead fall to -1.0%, the single currency has been strengthening somewhat against rivals. While European Central Bank (ECB) President Mario Draghi has continued to iterate the possibility of fresh monetary loosening in December the common currency has been benefitting from traders positioning themselves ahead of Friday’s major US data. Bearish figures do not appear to be a particularly severe deterrent to Euro demand today, as weak German Construction and Eurozone Retail PMIs have equally failed to quell the current EUR/GBP exchange rate uptrend.
EUR/GBP Exchange Rate Forecast: Pound Volatility Predicted on Upcoming BoE Rate Decision
Tomorrow’s German Industrial Production is not forecast to show any particular strength, expected to slide from 2.3% to 1.3%. With Volkswagen sales having weakened since the initial emissions scandal revelations the outlook of the carmaker could well remain muted over the coming days, to potentially weigh down the Euro once again.
Should the BoE Monetary Policy Committee (MPC) prove hawkish today the Pound is likely to strengthen, with investors hoping for a signal that the first move on interest rates could come in the early months of 2016. Friday’s UK Visible Trade Balance could also provoke some volatility for the EUR/GBP exchange rate, with a continued narrowing of the nation’s deficit sure to encourage traders further.
Current EUR, GBP Exchange Rates
At time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was trending narrowly in the region of 0.7061, while the Pound Sterling to Euro (GBP/EUR) pairing slumped slightly around 1.4162.