GBP/EUR Hits a New Weekly-Low, Fluctuates on ECB Minutes
GBP/EUR dipped briefly during today’s session before edging higher after caution-influencing European Central Bank (ECB) minutes were released this afternoon.
The pair has remained close to this morning’s opening levels of 1.2393 despite earlier weakness. This is due to the ECB’s minutes revealing disagreements among policymakers on the stimulus package introduced last month.
Other ideas discussed by the ECB, such as corporate bonds and the possibility of a Bank of Japan-inspired tiered deposit rate system, are thought to have increased confidence in the ECB’s credibility.
The Pound Sterling to Euro (GBP/EUR) exchange rate plummeted to its lowest point since June 2014 during Wednesday’s session as poor UK growth diminished confidence in a floundering Pound even further.
Criticism of UK Prime Minister David Cameron and Slowing GDP Add Weight to Sterling
Quickly approaching a new two-year low, a Pound which can’t seem to catch a break lately seems to be suffering from a further dip in investor confidence after concerning ‘Panama Papers’-related headlines and disappointing Composite PMI.
The GBP/EUR pair slumped by over -70 pips during Wednesday’s session alone after data was unable to inspire positive Sterling movement amid caution over the latest government issue.
After reaching a daily high of 1.2460, the pair dropped to a 21-month low of 1.2345. At the time of writing, the pairing had dropped almost -0.5% and was trending in the region of 1.2379.
After pressure from the Labour party earlier this week to clear the air on his family’s situation regarding the ‘Panama Papers’ leak, UK Prime Minister David Cameron has gone on record to say his immediate family are not benefitting from offshore funds.
The leak involves millions of documents detailing various monetary crimes such as tax evasion and money laundering using ‘tax havens’. Many of the world’s political and societal elite are reportedly involved, including Cameron’s late father, Ian Cameron.
This week’s data has also disappointed investors and analysts so far. Tuesday’s UK Services and Composite PMI press release indicated that despite positive March figures, the first quarter of 2016 had been the weakest in terms of growth since Q1 2013.
Disappointing Eurozone Data Heightens Euro Volatility
While various Eurozone-connected figures have been namedropped among the ‘Panama Papers’ leak, their influence on the Euro has been minimal and investors have seen the shared currency as preferable to currencies undergoing scandal-related political strain.
Unfortunately Wednesday’s new underwhelming data releases for the Eurozone follow a series of other poor scores throughout the week.
Retail PMI for many major regions, including Germany, France, Italy and the general Eurozone was released on Wednesday morning, with almost all sets printing below 50 and below February’s scores.
Besides Germany’s retail PMI, which printed at 54.1 over February’s 52.5, all major Eurozone retail PMIs printed below 50, with France’s as low as 45.5 and the Eurozone’s overall retail PMI scoring 49.2, down from February’s 50.1.
Pound Sterling to Euro Exchange Rate Forecast: ECB Statements Could Influence GBP/EUR
This week’s Eurozone data has likely subsequently warned investors that the Eurozone’s economy is perhaps not recovering as analysts and the ECB had hoped. Optimism sparked by last week’s comparatively upbeat Eurozone CPI seems to have been largely let down by this week’s PMI prints.
Today, various members of the European Central Bank are due to speak. ECB President Mario Draghi is due to meet with Portugal’s President and an account of the ECB’s last monetary policy meeting is also set for release.
This morning will also see the ECB’s Watchers Conference and ECB Vice President Vítor Constâncio speak in Brussels.
However, as political and economic uncertainty within Britain continues to mount, any Euro weakness inspired by the ECB may be outmatched by the struggling Pound’s recent volatility.
Sterling could be set to weaken further as a Reuters poll suggests the EU Referendum’s ‘Leave’ campaign is gaining over the ‘Stay’ voters.