Euro (EUR) on Uptrend Today after Solid German Inflation Report
After the finalised November Consumer Price Index for Germany printed as expected this morning, clocking in at 0.4%, the Euro (EUR) has begun to trend higher against the Pound (GBP). With markets disappointed by the dovishness of Bank of England (BoE) policymakers at yesterday’s policy meeting traders are lacking in incentive to buy into Sterling ahead of the weekend. As such, the GBP/EUR exchange rate is slumped in the region of 1.3831.
Bank of England (BoE) Votes 8-1 to Hold Interest Rates Steady, Pound (GBP) Muted
Market hopes were once again dashed today as Bank of England (BoE) policymakers voted 8-1 in favour of making no change to domestic interest rates, offering no strong indications that a rate hike is likely in the earlier months of 2016. Nevertheless, thanks to the weakness of the Euro (EUR), the Pound Sterling to Euro (GBP/EUR) exchange rate has remained on an uptrend this afternoon in the region of 1.3830.
After a strong bullish run the Euro (EUR) has softened on Thursday morning, with a lack of domestic data to prompt support, while the Pound (GBP) is experiencing volatility in advance of the day’s Bank of England (BoE) rate decision.
Euro (EUR) Trends Lower on Market Caution over Volkswagen Press Conference
Despite an unexpected contraction evidenced by Germany’s October exports, which slumped sharply from 2.6% to -1.2%, the Euro (EUR) remained on relatively bullish form yesterday. Traders were largely reassured by the announcement that far fewer of Volkswagen’s vehicles than initially estimated had been found to have falsified carbon dioxide emissions. The limited impact of the ongoing scandal helped to prevent the common currency from weakening against rivals as markets continued to react to the disappointing policy changes delivered by the European Central Bank (ECB) last week.
Volatility for Pound Sterling (GBP) ahead of BoE Rate Decision Today
The Pound (GBP) experienced an unexpected boost in demand on Wednesday, contrary to the more dovish news that the British Chambers of Commerce had revised its three-year growth forecasts for the UK. Although the domestic economy is now expected to grow by 2.4% instead of the more optimistic 2.6% previously forecast this did little to deter investors, who pushed the GBP/EUR exchange rate to a daily peak of 1.3842. However, ahead of today’s final Bank of England (BoE) rate decision and meeting minutes of the year, sentiment has turned a little more bearish towards Sterling.
While markets are not anticipating any change in interest rates at this juncture there are some hopes that policymakers may indicate a potential date for the much-anticipated start to the cycle of monetary tightening. Should more than one member of the Monetary Policy Committee (MPC) vote in favour of an immediate hike then the Pound is likely to strengthen markedly this afternoon.
GBP/EUR Exchange Rate Forecast: Euro Predicted to Soften as US Data Supports Odds of Imminent Fed Rate Hike
As no surprises are anticipated for tomorrow’s finalised German Consumer Price Index, the single currency is likely to see fairly limited volatility ahead of the weekend. However, should the latest US Advance Retail Sales and University of Michigan Confidence Index print solidly then the Euro could decline on the back of a strengthening US Dollar (USD). The high chances of the Fed opting to increase interest rates at next week’s policy meeting are also likely to weigh on the common currency.
Fresh movement could also be triggered for Sterling on Friday with the release of the BoE/GfK 12 month inflation forecast, which any reduction in outlook set to push the GBP/EUR exchange rate down.
Current GBP, EUR Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3835, while the Euro to Pound Sterling (EUR/GBP) pairing slumped around 0.7228.