- Pound Euro Exchange Rate Hits 1.1300 Thursday – Sterling selloff continues
- Services PMIs Beat Expectations in UK and Germany – Sterling fails to capitalise on week’s data
- German and French Retail PMI Disappoint – German construction PMI beats forecasts
- Update: UK Data Disappoints on Friday – Fails to support GBP after currency crash
- Forecast: Quiet UK Eco-Calendar Ahead – Sterling could recover from cheapest levels
Pound Euro Exchange Rate Suffers from GBP Crash on Friday
The Pound Euro exchange rate suffered an unexpected blow on Friday, as a sudden and sharp drop in Sterling value shook markets in the early hours of the morning.
Analysts are unclear on what exactly caused the currency’s drop, with suggestions ranging from a mistaken ‘fat finger’ trade to an automated algorithm gone wrong.
However, the main takeaway is that Sterling ultimately failed to recover to Thursday’s best levels, despite attempting to improve throughout the day.
As a result, GBP EUR looks to end the week near its worst levels in over five years in one of the Pound’s biggest weekly value-drops since the week of the Brexit vote itself.
The day’s economic data did little to change things. Britain’s datasets failed to meet expectations, while the Euro was given slight boosts thanks to solid German production data as well as disappointing US labour figures.
Friday afternoon’s highly anticipated US Non-Farm Payroll results for September printed below expectations, allowing the Euro to benefit from weakness in its rival, the US Dollar.
(Previously updated 16:36 BST 06/10/2016)
Pound Euro Exchange Rate Fails to Emerge from 2016 Worst
Despite the market-wide Pound selloff appearing to cool during Wednesday’s trade session, Sterling resumed its falls on Thursday taking it to new lows. The pair remained near these lows for the remainder of Thursday’s European session.
Friday’s session will see the publication of Britain’s August industrial and manufacturing production scores, as well as the August update to Britain’s trade balances.
If the low value of the Pound helps to lighten Britain’s trade deficit more than expected, this could offer support to the currency throughout the day.
The day’s American data could also bolster the Pound, as impressive US Non-Farm Payroll figures would likely weaken the Euro as the USD’s biggest trade partner.
However, the Pound Euro exchange rate is highly unlikely to recover to close to the week’s opening levels on Friday’s session alone, and is on track to end the week lower.
(Previously updated 14:34 BST 06/10/2016)
As of the early afternoon, many analysts believe Sterling still has further to fall after the Pound Euro exchange rate extended its worst 2016 levels and hit a low of 1.1301. According to Reuters;
‘Sterling will plumb new multi-decade lows in the coming months as the battered currency extends its slide on concerns divorce proceedings with the European Union could be difficult and leave Britain outside Europe’s single market, a Reuters poll found. …
The median forecast in the poll, taken this week, suggested the pound would fall to $1.24 in the run-up to Prime Minister Theresa May triggering Article 50 to formally begin the two-year countdown to Britain’s exit from the EU.’
(Previously updated 12:26 BST 06/10/2016)
The Pound to Euro exchange rate continued to trend limply near its worst levels on Thursday morning, struggling to sustain any of the advances it made on Wednesday as Sterling sentiment remained weak.
Eurozone data was mixed but seemed to offer the Euro some light support. Retail PMI from the Eurozone bloc disappointed in most prints, with the overall Eurozone score falling to contraction of 49.6. Despite this, the day’s German construction data came in above expectations.
(Published 07:00 BST 06/10/2016)
The Pound Euro exchange rate was finally given a little breathing space during Wednesday’s trade session, as a Sterling selloff influenced by Brexit jitters that lasted throughout Monday and Tuesday finally cooled off.
GBP EUR remains deep in lows not seen since 2011, and briefly fell as low as 1.1315 on Wednesday morning. While the pair was able to climb away slightly, it struggled to near the key level of 1.14 throughout the day.
Brexit-Panic Selloff Finally Cools, Leaving Pound (GBP) Flat
After two full trading sessions plummeting across the board, the Pound finally found some footing in Wednesday trade as investor jitters towards the UK’s Brexit process cooled off.
Over the last week, British markets have been panicked by news that UK Prime Minister Theresa May had announced the Brexit would formally begin before the end of March 2017.
Indications that UK officials would not concern themselves with attempting to keep access to the European Union’s single market also caused great consternation for UK investors, weighing heavily on the Pound and influencing GBP selloffs.
While markets calmed on Wednesday, investors refused to begin a Sterling recovery rally on the back of this week’s PMI results, despite all of Markit’s September results beating expectations. Services beat forecasts of 52.2 by only slipping from 52.9 to 52.6, while the Composite score climbed from 53.6 to 53.9.
Instead, it was comments made by PM May on Wednesday afternoon that gave Sterling support, as she appeared to criticise the Bank of England’s (BoE) ultra-loose monetary policy. The Financial Times reported that May said;
‘While monetary policy with super low rates and quantitative easing have provided emergency medicine, we have to acknowledge some of the bad side effects. People with assets have got richer, while people without have not.’
Euro (EUR) Strengthens as German Services PMI Beat Preliminary Results
Eurozone investors have recently been concerned about economic activity in Germany, the European Union’s biggest economy.
Demand for the Euro waned in late-September, for example, when Germany’s preliminary September services PMI came in well below expectations at 50.6.
However, Wednesday’s final September services figures slightly relieved some investors as Germany’s score eventually came in at 50.9. While still lower than initial forecasts, this lightened concerns slightly and led to Eurozone services beating preliminary scores with a final result of 52.2.
The Euro didn’t strengthen considerably however, as the day’s stats were mixed enough to limit the shared currency’s advances.
Eurozone retail sales performed poorly in August for example, coming in at -0.1% month-on-month and falling to a disappointing 0.6% year-on-year despite hopes that it would only slow to 1.5%.
Pound Euro Exchange Rate Forecast to Recover Gradually until Friday
As Sterling has finally been given a little supportive ground due to Theresa May’s fresh criticism of the Bank of England’s (BoE) ultra-low interest rates, markets may see an opportunity to buy the Pound up from its lowest levels on Thursday.
Thursday’s session won’t see much in the way of influential British data, as only low-influence figures like car registrations and labour costs figures will be published.
As a result, the Euro is likely to drive GBP EUR movement on Thursday. Eurozone markets will react to Germany’s August factory orders figures, as well as more September PMIs from Markit including construction stats for Germany and retail PMI for Germany and France.
If the results of these reports beat expectations, it’s possible that the Euro could see a sturdier increase in demand following its mixed movement thus far this week. If not, Sterling is likely to continue its recovery attempts throughout the day.
However, Friday’s session is likely to see some more inspired movement in Sterling, which could even give the currency some further footing to base a recovery rally on.
August industrial and manufacturing production, as well as August’s UK trade balance results, will be published on Friday morning. As forex markets reel from the Brexit selloff seen earlier this week, data could begin to drive the Pounds Euros exchange rate once more.