- Pound Euro Exchange Rate Forecast to Shed Gains – Could extend weekly lows
- UK Data Reveals Contraction in UK Economy – While Eurozone more resilient than expected
- Update: BoE Acts Today – ‘Super Thursday’ causes Sterling plummet
- Update: Eurozone Retail Sales PMI Today – Brushed over in favour of BoE
- Forecast: Quiet Economic Calendar Next Week – Investors likely to readjust
Pound Euro Exchange Rate Flounders on Friday
Sterling initially attempted to recover during Friday’s session, with the week’s dire news behind it and investors in a position to buy GBP from its worst levels.
This sentiment was boosted slightly by news that German factory orders had contracted in June, bringing the yearly score for German factory orders down to a disappointing -3,1%.
However, following the release of Friday afternoon’s highly impressive US Non-Farm Payroll report, focus was immediately taken away from the Pound and Euro as investors flocked to the ‘Greenback’.
While the Euro was also weakened by this movement, Sterling gave up its recovery attempts on Friday afternoon, leaving GBP/EUR fluctuating near the key level of 1.18 with a downside bias.
(Previously updated 17:01 BST 04/08/2016)
Pound Euro Exchange Rate Gives up Gains
The Pound to Euro exchange rate lost all its weekly gains within minutes on Thursday, hitting a new three-week-low after losing two cents as the Bank of England (BoE) announced that UK interest rates would be cut from 0.50% to 0.25%.
The BoE also announced new quantitative easing and bond purchase schemes, hoping to protect a post-Brexit Britain from the possibility of a recession.
Despite this, BoE Governor Mark Carney’s press conference was still grim, containing worsened unemployment and growth forecasts. Carney also implied that further cuts were possible, and didn’t outright deny that negative rates were off the table – instead commenting that he wasn’t ‘a fan’ of negative rates.
GBP/EUR has the chance of recovering slightly on Friday however. While the pair is unlikely to return to its weekly highs due to considerable pressure and poor economic news, it could rise slightly from its weekly lows.
(Previously updated 13:00 BST 04/08/2016)
BoE Cut Rates, Pound Euro Exchange Rate Falls Today
The Pound Euro exchange rate fell to a low of 1.1784 following the Bank of England’s (BoE) decision to cut interest rates by -0.25%.
Although the decision was widely expected, it still saw GBP plummet by over 1% across the board.
(Previously updated 08:00 GMT)
Today’s Bank of England (BoE) meeting – or ‘Super Thursday’ as it’s called by some – will be a vital deciding factor for the 2016 Pound Euro exchange rate forecast. With markets betting on whether the bank will merely cut rates, introduce many other stimulus measures, or avoid easing entirely, the results will be one to watch.
GBP/EUR fluctuated higher on Wednesday, attempting to hold its ground above the key level of 1.19 despite negative UK ecostats. The pair has rallied from a weekly low of 1.1783 since Tuesday morning and hit a high of 1.1936 on Wednesday. On Wednesday evening, the pair trended in the region of 1.1920.
Sterling (GBP) Advances Despite Dire PMIs
The Pound was set on continuing its second consecutive day of gains on Wednesday, attempting to edge higher throughout the session despite dire UK ecostats holding it back.
There genuinely was next to nothing good to be said for Britain’s economic news throughout the day, as Markit’s Services PMI met already-bearish preliminary figures of 47.4.
The overall Composite PMI failed to even meet low preliminary figures of 47.7, printing at 47.5 and indicating that the UK’s economy had shrunk even more than expected since the Brexit vote.
Despite this, Sterling continued to advance against currencies from nations with more solid economic prospects.
This is largely thought to be due to markets having already priced in BoE rate cuts and a contracting UK economy, with markets now buying the Pound from its lows ahead of Thursday’s expected BoE measures.
However, investors are likely poised to sell off the Pound quickly on Thursday. With Markit calling a BoE rate cut a ‘foregone conclusion’ in its Wednesday UK PMI report, Sterling remains heavily pressured.
Euro (EUR) Slumps Wednesday Despite Promising Stats
The Euro slipped lower against a majority of currency peers on Wednesday, following the shared currency’s most bullish movements since the Brexit vote in late-June.
After preliminary July PMIs released by Markit indicating that the Eurozone had been more resilient than expected since Britain’s vote to Leave the European Union, the Euro surged higher across the board. This movement lasted for much of the last week of July.
As a result, investors were hesitant to take the Euro higher on Wednesday as the Bank of England’s (BoE) ‘Super Thursday’ approached – even though final July Eurozone PMIs came in even better than preliminary figures. The Financial Times reported;
‘The Eurozone’s economic recovery remained resilient after the UK’s decision to break ties with the EU, according to a poll of purchasing managers that indicates growth in activity quickened in the aftermath of the Brexit vote.
The final reading of the July purchasing managers’ index for the single currency area, compiled by data firm Markit, rose to 53.2, up from 53.1 in June and well above the 50 level that marks an expansion in activity. It was also above an earlier “flash” estimate of 52.9.’
The promising results confirmed that not only had the Eurozone been more resilient than expected – but that the bloc’s July growth had beaten preliminary scores and even grown at a quicker rate than June despite most analysts expecting growth to have slowed.
A quick and solid recovery of the US Dollar on Wednesday is one potential cause for the Euro’s unexpected slip. The shared currency had gained considerable value from its US rival over the last week, but gave a lot back on Wednesday as USD appeal returned.
Pound Euro Exchange Rate Forecast: Bank of England Expected to Cut UK Rates
Once again the time is upon us, as the Bank of England (BoE) will likely, finally introduce a new stimulus package for the UK’s economy on this ‘Super Thursday’.
However, doubt lingers in the minds of most analysts, as this sureness of BoE action is very similar to that seen in July when the BoE shocked markets by leaving policy frozen despite widespread stimulus expectations.
Still, there is a very real chance that August’s meeting will be difference as solid UK economic figures have been revealed since July’s policy meeting three weeks ago.
Since then, Markit have released its preliminary and final UK PMIs. These had been grim enough to lead some BoE officials, such as Martin Weale, to shift on previously hawkish stances and indicate that an interest rate cut at the very least was on the cards.
Markets currently expect that the UK interest rate will be chopped from its current low of 0.50% to a new record-low of 0.25%. Many speculate that the bank will also introduce other easing measures, such as a new quantitative easing policy.
With the Pound already having dropped considerably in the last week due to high BoE rate cut bets, GBP may not fall considerably on Thursday unless the bank’s stimulus package is more aggressive than expected. On the other hand, Sterling will surge higher if the BoE once again shocks markets by leaving rates frozen.
Eurozone retail PMIs will also be published on Thursday, but with the BoE meeting in focus it is unlikely that these figures will influence the Pound Euro exchange rate forecast considerably.