- Pound Euro 2016 Exchange Rate Slips Below 1.12 Level – Sterling rocked on BoE easing bets
- German Business Confidence Up – German businesses recover from Brexit jitters in October
- Update: German Consumer Confidence Disappoints – But Euro stronger on weaker USD
- Thursday Forecast: Britain’s Q3 Growth Report – Will this be enough to inspire GBP movement?
Pound Euro 2016 Exchange Rate Begins Recovery Wednesday Afternoon
After performing poorly and trending flatly against the Euro for most of Wednesday, the Pound began to extend its recovery attempts later in the afternoon.
While GBP EUR’s advances were minimal, only up around 0.2% on the day, the pair was able to emerge above the key 1.12 level once again after falling to 1.11 on Tuesday.
The Pound and the Euro were both able to take advantage of a weaker US Dollar throughout the day, as forex markets perceived the day as the last relatively quiet news day until after the US Presidential election on the 8th of November.
As a result, investors readjusted their positions on major currencies. This included buying up the Pound and Euro slightly as the currencies had been perceived as oversold in markets.
If Thursday’s Q3 UK growth figures beat expectations, the Pound could continue its recovery trend and return to the week’s opening levels by Friday.
(Previously updated 12:42 BST 26/10/2016)
The Pound Euro 2016 exchange rate trended within a narrow range of Tuesday’s closing levels throughout Wednesday morning, as Sterling lacked the grounds to mount a sustained recovery while the Euro held its ground better on a weaker US Dollar.
As the US Dollar is the Euro’s biggest trade partner, a bullish USD often means weakness for the Euro. With forex markets briefly indulging in riskier investments on Wednesday, the US Dollar dropped which gave the shared currency room to breathe.
The Euro was also able to hold firmly due to Monday and Tuesday’s solid Eurozone results. However, Wednesday’s disappointing German consumer confidence score from GfK did little to help Euro demand.
(Published 07:00 BST 26/10/2016)
The Pound Euro 2016 exchange rate trended flatly and within a relatively narrow range for most of Tuesday, despite a number of strong Eurozone datasets supporting the Euro. European Central Bank (ECB) easing bets continue to hold down the shared currency.
GBP EUR is currently around two cents higher than the seven-year-lows of 1.09 seen earlier in October. However, the pair remains well below October’s opening levels and has had difficulty sustaining advances.
Pound (GBP) Exchange Rates Slip on BoE Easing Speculation, GBP EUR Still up From 2016 Lows
Largely continuing movement seen throughout the last week, the Pound continued to trend flatly and within a relatively narrow range against the Euro and most of its other major rivals on Tuesday.
However, on Tuesday afternoon the Pound dropped by over half a cent against the Euro as investors reacted to the day’s economic developments in Britain.
While British headlines were dominated by news that the British government planned to go ahead with a considerable expansion to Heathrow Airport, Pound traders were more concerned with other matters.
UK Chancellor Philip Hammond made various statements on Tuesday hinting that Britain had many economic struggles ahead of it, including comments fuelling speculation that Pound weakness would impact national inflation.
He also stated that he supported the Bank of England’s (BoE) eased monetary policy, including the potential for further quantitative easing;
‘No request for quantitative easing has ever been refused, and I can’t see why it would be different in future.’
While this added to investor hopes that the BoE would maintain its independence, many sold off the Pound due to fears of further BoE easing despite higher inflation.
Euro (EUR) Sentiment Weak Despite Strong Eurozone Ecostats
While the Euro was able to hold its ground against a turbulent Pound on Tuesday, the shared currency performed relatively poorly against its other rivals despite another day of strong Eurozone ecostats.
Following Monday’s impressive preliminary October PMI for the Eurozone, in which overall Eurozone scores all came in above expectations, the IFO also published a promising German business optimism report for October.
IFO’s business climate print improved from 109.5 to 110.5, beating expectations of 109.6. The current assessment figure climbed from 114.7 to 115. Lastly, the expectations score surpassed expectations of remaining at 104.5 and improved to 106.1.
Last week’s European Central Bank (ECB) news continued to weigh on Euro demand however, as more investors reached the conclusion that the ECB’s quantitative easing scheme would likely be extended in December.
Some analysts, such as Jordan Rochester from Nomura Holdings Plc believe the Euro has further to fall still. He stated about last week’s ECB meeting;
‘There’s always a risk of disappointment, but it’s quite a different scenario for markets this time as positioning was over-extended going into that meeting’
He also stated that the ECB confirming that QE tapering was not on the table ‘ruled out the upside Euro potential for many market participants’.
Pound Euro 2016 Exchange Rate Forecast: Narrow Trade Could Continue Until Thursday
While some economic data will be published on Wednesday, it’s more likely that Pound and Euro traders will continue reacting to underlying economic and political factors.
The Pound for example, is more likely to see an extended reaction to Tuesday’s comments from Chancellor Hammond and BoE Governor Mark Carney than see its movement inspired by the BBA’s September house loans report.
Similarly, if the Euro did not react strongly to Monday’s Eurozone PMIs or Tuesday’s German business confidence scores, it’s unlikely that GfK’s German consumer confidence score for November will cause considerable Euro movement.
Thursday’s session, on the other hand, has much greater potential for Pound Euro (GBP EUR) exchange rate movement. It’s likely that despite post-Brexit UK trade concerns continuing to weigh on UK markets, investors will still react in some way to Britain’s Q3 Gross Domestic Product (GDP) results.
Economists have stated in recent weeks that despite a brief Brexit vote shockwave, Britain’s economy is still on track to perform well in the second half of 2016.
If Q3 UK growth beats expectations, the Pound Euro exchange rate could strengthen as the end of 2016 approaches, but if these scores disappoint GBP could slump further as investor worries about Britain’s economic performance since the Brexit vote grow.