- GBP EUR Exchange Rate Nears 1.18 – Drops as Pound sentiment wanes
- Sterling Slips as BoE Policymaker Shifts Stance – Weale dovish after recent UK PMIs
- Update: British Q2 Growth Report Solid – But means little for investors
- Update: German Consumer Confidence Optimistic – Inflation up in July too
- Forecast: Eurozone Inflation Estimate Ahead – Will Friday’s data impress?
GBP EUR Exchange Rate Plummets on Thursday
The Pound to Euro exchange rate slumped to its lowest levels in around two weeks on Thursday, as investors sold off the Pound and bought the Euro throughout the day amid opposite economic expectations.
Grim reports of how the Brexit has affected the UK job market dragged Sterling lower throughout the day, with many investors concerned that the Brexit vote could have been behind Lloyds Bank’s decision to speed up its job and branch cutting process.
As a result, GBP/EUR slipped below 1.1850 on Thursday afternoon, pushed further down by the day’s optimistic Eurozone figures.
Further softness in Pound Sterling (GBP) exchange rates occurred as BoE official David Blanchflower hinted at the possibility of the central bank cutting interest rates into negative territory in order to bolster the domestic economy.
Sterling will remain pressured in the coming week as investors await next Thursday’s Bank of England (BoE) meeting. The Euro, on the other hand, could be boosted further if Friday’s Eurozone July CPI estimate comes in above expectations.
(Previously updated 13:34 BST 28/07/2016)
GBP EUR Exchange Rate Down 0.7% as German Consumer Prices Accelerate
The Pound Euro exchange rate fell by over 0.7% as the European session progressed and Germany published better-than-forecast German inflation figures.
German inflation increased by 0.3% on the month and 0.4% on the year, defying respective forecasts of 0.2% and 0.3%.
Given this result, it’s likely inflation in the Eurozone as a whole may be stronger than predicted.
The GBP EUR exchange rate was trending in the region of 1.1860
(Previously updated: 28/07/2016)
Pound Euro Exchange Rate Falls Following Fed Rate Decision
With the Fed’s interest rate decision weighing on the US Dollar, the Euro was boosted against the Pound – seeing the GBP EUR exchange rate slide -0.5% from the day’s opening levels.
Better-than-expected German employment data also lent the Euro support. If today’s German Consumer Price Index report shows an improvement in inflation the GBP EUR exchange rate could extend declines as trading continues.
GBP EUR is currently trending in the region of 1.1891.
(Previously updated 27/07/2016)
UK GDP Beats Forecasts But Pound Euro Exchange Rate Remains Trending Lower
The Pound Euro exchange rate remained trending lower on Wednesday following the publication of the UK’s growth figures for the second quarter.
The rate of expansion may have exceeded forecasts, but as the figures largely related to pre-Brexit conditions they failed to provide the Pound with much support.
The GBP/EUR exchange rate is currently trending in the region of 1.1938.
(Previously updated 09:00 27/07/2016)
The GBP EUR exchange rate was unable to retain its best levels on Tuesday as poor economic data and a dovish statement from BoE hawk Martin Weale weighed on the Pound’s appeal and prevented it from advancing. The Euro, on the other hand, remained sturdy across the board.
GBP/EUR briefly dropped to a new weekly low of 1.1872 on Tuesday morning as investors reacted to Weale’s comments. Since then, the pair has recovered slightly and trended flatly in the region of 1.1940 on Tuesday afternoon.
As today’s UK GDP data largely relates to the pre-Brexit period, the report is unlikely to inspire much Pound movement if it prints exactly as forecast. However, should the rate of output prove to have been weaker than expected in the second quarter, Sterling could decline.
Sterling (GBP) Weighed Down by Comments from BoE’s Weale
Friday and Monday’s British data doesn’t just seem to have disappointed UK markets, but Bank of England policymakers too.
On Friday, a hat-trick of dire preliminary PMI scores for July indicated that the British economy was not handling the Brexit news well, and that key sectors such as Manufacturing and Services were on track to contract considerably in July.
This was backed up on Monday by a report from CBI that the Manufacturing business climate had experienced its biggest plummet since 2009.
Last week, Bank of England (BoE) policymaker Martin Weale stated that so far, he didn’t see a desperate reason to cut the key UK interest rate in the BoE’s upcoming August meeting.
However, according to an interview with the Financial Times, Weale has changed his tone somewhat in response to Friday’s shocking PMI figures.
‘The new stance of Martin Weale, an independent member of the Bank of England’s Monetary Policy Committee, all but guarantees that the central bank will announce a package of stimulus measures to fight a post-referendum downturn at its August 4 meeting. One of the nine committee members voted last month to cut rates and three have now said they are minded to do so.
… Mr Weale also made it clear monetary policy would not boost the economy straight away, so any action would not save the UK from a recession if growth is beginning to shrink.’
As a result of the news, Sterling briefly plummeted. However, as investors already expected BoE stimulus in August, the Pound was able to stabilise slightly before too long.
Euro (EUR) Sturdy as Eurozone Sentiment Improves
In contrast to recent UK ecostats, recent Eurozone data has consistently suggested that the currency bloc is weathering potential damage from the Brexit vote better than markets expected.
Following more positive-than-expected PMI figures from last Friday, a report on the German business climate in July from IFO on Monday continued the trend.
While the economic calendar was relatively quiet during Tuesday’s session, Euro sentiment remained relatively solid as fears that the Brexit could have a serious effect on the Eurozone continued to wane.
However, factors such as a rise in Euroscepticism following the Brexit, as well as growing concerns about a perceived banking crisis in Italy, are weights remaining on the Euro’s shoulders.
According to Sputnik;
‘The Italian financial system has been in bad shape for years, but Brexit has put additional pressure on Italian banks that have struggled under the deadweight of bad loans. If not dealt with, the financial system of the third largest economy in the Eurozone could “lead to its collapse,” the Izvestiya newspaper asserted.’
Despite these fears, Eurozone officials claimed recently that the crisis was not a new one and that it would be dealt with naturally over time.
GBP EUR Exchange Rate Forecast: British Growth Figures Ahead
Wednesday is set to be the key session for Pound movement this week, with highly anticipated Q2 Gross Domestic Product (GDP) scores due for publication.
While this preliminary report only covers April through June, it will serve as a key indication of how much market jitters damaged Britain’s economy in the run up to June’s EU Referendum.
Scores worse than the expected 0.5% are likely to worsen fears that June’s Brexit jitters undermined the economy before the Referendum result was even announced. Q3 growth forecasts would plummet in response.
On the other hand, a better-than-expected Q2 GDP is likely to increase hopes that the UK economy has been sturdy enough to soften the Brexit’s blows from July onwards.
Key Eurozone data follows on Thursday, including German unemployment figures for July, as well as July’s preliminary German inflation figures.
Lastly, Friday’s session will see the publication of the June Eurozone unemployment rate, as well as preliminary figures for the Eurozone’s July inflation and Q2 growth results.
Looking to the week ahead, the Pound is unlikely to make a considerable recovery as UK news reveals post-Brexit economic damage and the next BoE meeting looms. As a result, the GBP EUR exchange rate is likely to remain pressured.