- GBP EUR Exchange Rate Fluctuates on Downside – UK data fails to boost Sterling
- NIESR Estimates UK Economic Contraction in July – And hints at technical recession
- Forecast: Eurozone Growth Due Friday – Eurozone’s Eco calendar quiet until then
- Forecast: UK RICS House Prices Disappoint – Construction output on Friday
GBP EUR Exchange Rate Nears 1.15 on Thursday
The Pound to Euro continued to slide lower throughout Thursday’s session. Initially, Sterling held its ground but ultimately plunged lower as BoE rate cut bets and recession concerns weighed on any appeal.
According to a new Reuters poll, most economists believe that the UK’s economy could already be entering a mild recession. They also believe that the Bank of England (BoE) will expand its already aggressive easing package again before 2017.
Sentiment for the Euro remained decent, but investors are anxious on the currency ahead of Friday’s session which will see the publication of Q2 Eurozone growth figures.
These have the potential to be highly influential on the Euro if they indicate that the bloc’s growth was proceeding above or below expectations towards the end of the year’s first half. However, it is unlikely for Sterling to make a solid recovery, meaning GBP/EUR will likely end with levels far lower than last week’s.
(Previously updated 16:53 BST 10/08/2016)
GBP EUR Exchange Rate Loses Almost -0.6% on Wednesday
Investors continued to neglect the Pound on Wednesday, with the unappealing currency continuing to trend lower against its European rival. By Wednesday afternoon, GBP/EUR had slipped as low as 1.1640.
This movement was encouraged by a sturdy Euro and a weak Pound. Sterling trailed lower upon news that the Bank of England’s (BoE) latest quantitative easing (QE) scheme had already hit a snag in less than a week since its announcement.
UK government bonds ending in 2019 and 2020 fell into negative yields, marking the first negative bond yields in UK history. The BoE itself had fallen just £52m short of its first £1.17bn purchasing target due to a lack of sellers.
While the bond-yield situation had been largely resolved by the afternoon thanks to a second reverse-auction from the BoE, UK market sentiment remained low and Sterling slumped.
(Previously updated 16:16 BST 10/08/2016)
The GBP EUR exchange rate slipped lower and lower throughout Tuesday trade, trending with a downward bias as the day’s UK ecostats disappointed markets. Most influential was NIESR’s July Gross Domestic Product (GDP) report, which indicated that the UK economy had begun to contract.
GBP/EUR has already fallen quite far from last week’s highs of 1.1973. Since then, the pair has lost almost three cents in value and has sunk back down to a low not seen since early July – 1.1681. As Tuesday’s European session came to a close, GBP/EUR trended just below the key level of 1.17.
Less than inspiring UK data and the belief that the BoE has more stimulus up its sleeve were largely responsible for the Pound’s downtrend against not only the Euro but the majority of its other most traded peers.
The Pound US Dollar exchange rate, meanwhile, remained trending below 1.30, with the pairing hitting a low of 1.2989.
Pound (GBP) Undermined Once More as NIESR Suggests Possible Recession
Sterling remained heavily pressured during Tuesday’s session. Despite a lack of ecostats driving it on Monday, Sterling was thoroughly unable to recover from its worst levels as bets of future Bank of England (BoE) easing measures weighed on the currency’s appeal.
The central bank’s leading officials indicated last week that it may need to expand its current stimulus package in the coming months if the UK’s growth prospects do not shape up.
This possibility looked increasingly real to investors after a bearish report from the National Institute of Economic and Social Research (NIESR) was published on Tuesday afternoon.
NIESR’s report included an estimate on Britain’s growth in July, with the group projecting that UK’s Gross Domestic Product (GDP) would come in at a low 0.3% for the three months into July.
To make matters worse, NIESR has estimated that the UK’s economy began to contract in July – shrinking by around -0.2% in the first month since the UK’s Brexit vote. This led to the Pound becoming considerably weaker towards the end of the day.
According to NIESR research fellow James Warren;
‘We estimate that in the three months to July the UK economy grew by 0.3 per cent, a marked economic slowdown. The month on month profile, suggests that the third quarter has got off to a weak start, with output declining in July. Our estimates suggest that there is around an evens chance of a technical recession by the end of 2017.’
Euro (EUR) Relatively Sturdy Despite Lack of Ecostats
The only notable Eurozone dataset published on Tuesday was the June update for Germany’s trade figures. Surprisingly, German exports only grew by a slow 0.3%, letting down an expected improvement from -1.8% to 1.1%. Imports were up from 0.1% to 1.0%.
Despite this, the German trade surplus came in above expectations. Expected to improve from €21.0b to €23.0b in June, the figure instead jumped up to €24.9b.
Appeal for the shared currency has been relatively solid for the last week, as July data has continued to indicate that the Brexit has had less negative effect on the Eurozone’s economic growth than expected.
Poor UK data and mixed US data has also left the Euro more appealing than its two biggest rivals.
Despite this, the Euro’s advances were slightly weighed down on Tuesday afternoon. This is likely due to news that German 10-year bond yields had continued to fall into negative levels, falling to -0.13%.
GBP EUR Exchange Rate Forecast: Can Sterling Advance Before Friday?
The next couple of days will be surprisingly quiet ones for the Pound and Euro, potentially the first real break from slews of ecostats since the Brexit vote itself in late-June.
No key ecostats for Britain or the Eurozone are due for publication on Wednesday at all, leaving GBP/EUR to fluctuate freely on market whims unless business news surprises investors.
This may be an ideal opportunity for investors to sell remaining short positions from last week’s ‘Super Thursday’. If investors decide to settle on the Pound at its new cheapest levels, the currency could enjoy a limited recovery rally during a quiet Wednesday.
Similarly, Thursday’s sole UK data report will be the July house price balance from RICS. It is expected to fall from 16% to 6%, but unless this figure proves influential GBP/EUR could just continue any Wednesday movements.
Friday’s session could be the most influential of the week however. Not only will UK construction figures for June be released, but preliminary Q2 Eurozone Gross Domestic Product (GDP) prints.
As markets are now more confident that the Eurozone had largely weathered Brexit-related panic and jitters, these figures could give markets a decent idea of the health of the Eurozone’s economies in Q2 2016.
Final German Consumer Price Index (CPI) scores for July, which will be published on Friday morning, may also be heavily influential for this week’s GBP EUR exchange rate movement.