Exchange rate news: With UK inflation failing to rise in line with forecasts, the Pound Euro exchange rate dipped 0.2% on Tuesday. The modest loss left GBP EUR trading in the region of 1.1835.
- Pound Euro Rate Limp on Last Week’s Exchange Rate News – Holds near 1.18
- BCC’s UK Growth Forecasts Cut due to Brexit Vote – 1.8% GDP expected this year
- Update: UK Inflation Fails to Impress – Yearly score remains at 0.6%
- Forecast: What Will the Bank of England do This Week? – September easing seen as unlikely
Wednesday’s Exchange Rate News Does Little to Boost GBP
The Pound to Euro exchange rate fell even further to the key level of 1.1700 on Wednesday, briefly slipping as low as 1.1695 before recovering to trend in the region of 1.1715 for most of the afternoon.
The day’s economic news included Britain’s August jobless claims results, and employment scores from May through July. A worse-than-expected amount of 2.4k new jobless claims was added since July according to the August print, but the claimant rate remained at 2.2%.
While markets were slightly cheered by a better-than-expected employment change of 174k from May to July, as well as indication that the job market had been thus far unaffected by the Brexit vote, some analysts were concerned by news that real wages (wages excluding bonuses) had dropped to 2.1%.
Overall the day’s news was unable to keep Sterling trending strongly, as the currency was sold off later in the day due to concerns that the Bank of England (BoE) could take on a dovish tone in its highly anticipated Thursday meeting.
(Previously updated 16:43 BST 14/09/2016)
GBP/EUR Exchange Rate News: Pound Plunges Tuesday as CPI Disappoints
The Pound to Euro exchange rate plummeted on Tuesday, experiencing a solid downtrend of over -1% at some points in the day and nearing the key level of 1.1700 as the day drew on.
While Sterling initially held its ground on Tuesday morning following the publication of Britain’s August inflation results, the currency became weaker and weaker against major rivals the Euro and US Dollar throughout the day, giving up all of Monday’s advances and more.
By the afternoon, GBP/EUR was trending at its lowest levels since the end of August as investors readjusted their bets for how optimistic the Bank of England (BoE) could be in its Thursday meeting.
Markets now expect that the BoE will keep its current aggressive stimulus package in affect and could even hint at further easing, which would send Sterling plunging.
However, impressive job figures may support the Pound. If Wednesday’s August jobless claims figures and July employment results impress investors, GBP/EUR could recover from its worst levels.
(Previously updated 10:19 BST 13/09/2016)
UK Inflation Weighs on GBP EUR, ZEW Surveys Mixed
The Pound Euro exchange rate edged slightly lower during the European session as the UK’s inflation data for August printed below expected levels. CPI came in at 0.3% on the month and held at 0.6% on the year, defying respective forecasts of 0.4% and 0.7%.
However, the Euro’s gains were limited in light of the fact that the German ZEW economic sentiment and current situation surveys printed below forecast levels.
(Previously updated 08:00 13/09/2016)
Although the Bank of England’s upcoming policy meeting is likely to be the main driver of Pound Euro exchange rate shifts, the GBP EUR pair could fluctuate following the release of the UK’s latest Consumer Price Index. While a spike in inflation is likely to be attributed to the vote to Brexit and its impact on the Pound, the data could still lend Sterling some measure of support if it shows the annual non-core inflation figure of 0.7% forecast by economists.
Monday’s Pound Euro exchange rate news was fairly limited, with GBP EUR struggling to hold its best levels amid a lack of inspiring economic data. As a result, the pairing spent the day trending between 1.1788 and 1.1864.
GBP/EUR lost around a cent in value last week despite hitting a high of around 1.20 on Tuesday. As Brexit concerns returned to UK market activity, the pair slipped and by the weekend was at levels of 1.1813. The pair trended flatly on this level on Monday.
Pound (GBP) Exchange Rate Holds Ground on August PMI Results
Despite a lack of supportive ecostats so far this week, the Pound was able to hold above its worst levels throughout Monday’s session.
This was largely due to last week’s decent UK data and Sterling’s drops later in the week, with investors currently hesitant to continue selling off the British currency.
Last week’s supportive data included August’s Services PMI from Markit, which scored growth despite July’s contraction, and Friday’s July construction data.
Britain’s construction sector has struggled for much of 2016, so news that the print had come in stagnant rather than with further contractions was generally good news.
However, while some investors may have wanted to purchase Sterling from its Friday lows vs. the Euro, investors remained mixed on GBP on Monday as the British Chambers of Commerce (BCC) cut its UK growth forecast due to the Brexit vote. The BBC reported;
‘It now expects the UK to grow 1.8% this year, down from its March estimate of 2.2%, and by 1% in 2017 compared with its original forecast of 2.3%.
Uncertainty surrounding the UK’s negotiations over its EU exit would “dampen growth prospects”, it said, while consumer spending would weaken.
It said the UK “would skirt with”, but avoid, a recession.’
Euro (EUR) Steady Since Last Thursday’s ECB Meeting
Similarly to the Pound, the Euro lacked the supportive data to make a solid advance on Monday but was able to prevent Sterling advances thanks to last week’s central bank news.
The European Central Bank (ECB) held its first policy meeting since July last Thursday, and opted to leave economic policy frozen despite the bearish views of markets. The Financial Times reported;
‘The European Central Bank has signalled it will hold fire until the turn of this year before unleashing a fresh wave of stimulus, even as it inched down estimates for growth over the next two years.
The ECB did not even discuss extending its €80bn-a-month asset purchase programme on Thursday, with its president Mario Draghi concluding that the slight downgrades to its growth and inflation expectations were “not so substantial to warrant a decision to act”.
The ECB instead only reiterated that it would continue quantitative easing until “at least” next March, as it sought to balance lacklustre economic growth against the drawbacks of further monetary policy loosening.’
As the ECB hesitated to indicate that policy would be expanded, this was seen as surprisingly hawkish by many investors and caused the Euro to strengthen towards the end of last week.
This was despite last week’s disappointing Eurozone data, which piled on top of a generally pessimistic August performance for the Euro currency bloc.
The Euro was even weakened on Friday by disappointing German trade balance figures. Generally low economic sentiment for the Euro prevented it from capitalising on a weak Sterling on Monday.
Pound Euro Exchange Rate News Forecast: Inflation Stats and BoE Meeting Still Ahead
The Pound to Euro rate is far more likely to see inspired movement after Tuesday’s exchange rate news, as key UK ecostats will be published in the morning.
Germany’s final August Consumer Price Index (CPI) figures, which will be published just as the European session begins, are expected to meet preliminary scores of 0.0% month-on-month and 0.4% year-on-year. These figures are unlikely to impress.
Later in the morning, Britain’s own August inflation results will be published. Markets currently estimate that monthly inflation will improve from -0.1% to 0.4%, and year-on-year inflation will increase from 0.6% to 0.7%.
If inflation comes in above expectations, Sterling may surge. However, inflation may lose control in the coming months due to the low value of the Pound – which would be problematic for the Bank of England (BoE).
Tuesday’s session will also see the publication of the Eurozone’s final Q2 employment rate results, as well as ZEW’s latest economic sentiment survey report for Germany and the Eurozone in September.
As a result, Tuesday’s session will be vital for this week’s Pound to Euro exchange rate news, even before Thursday’s BoE meeting and Eurozone CPI report.