- Pound Euro Exchange Rate Near 1.08 – Up from lows of 1.07
- Spanish Inflation Falls Short – But Eurozone inflation beats expectations
- GBP Forecast: PMIs Come in From Friday – Services print next Tuesday
- EUR Forecast: ECB Meets Next Week – Final PMIs Friday through Tuesday
Updated 16:45 BST 31/08/2017:
Pound Euro Slips from Highs on Strong Eurozone Inflation
The Pound Euro exchange rate hit a weekly high of 1.0884 on Thursday morning, but due to Brexit uncertainties and strong Eurozone data the pair was unable to hold this high.
GBP EUR slipped and trended at around 1.0844 at the time of writing.
Despite the Eurozone’s core inflation stat remaining at 1.2%, the Eurozone’s August inflation projection came in at 1.5%, better than the forecast 1.4%.
This gave investors more hope that the European Central Bank (ECB) could take a more hawkish tone on monetary policy in the foreseeable future, and made the Euro more appealing.
[Previously updated 16:51 BST 30/08/2017]
GBP EUR continued to climb on Wednesday afternoon. The pair was trending at around 1.0845 at the time of writing.
The Euro’s strength was ultimately little affected by the day’s Eurozone data.
Germany’s August inflation projections beat expectations. Inflation edged higher from 1.7% to 1.8% year-on-year but slowed from 0.4% to 0.1% month-on-month.
[Previously updated 10:48 BST 30/08/2017]
The Pound Euro exchange rate slipped yesterday as investors reacted to the latest Brexit uncertainties and tensions while the Euro benefitted from European Central Bank (ECB) speculation. However, the pair rebounded from its lows as markets anticipated upcoming data.
GBP EUR dropped from 1.0944 to 1.0803 last week. Tuesday saw the pair hit 1.0745 – its lowest level since 2009 – but the pair has since recovered and now trends closer to Monday’s opening levels again.
Pound (GBP) Support Limited Despite Decent Data
The Pound’s weak-streak has continued in recent sessions. Investors have seen little reason to buy the British currency amid a lack of optimistic domestic data and persistent Brexit uncertainties.
Sterling tumbled to its worst levels since 2009 against the Euro yesterday, as investors digested the latest Brexit developments.
While the UK government published a series of Brexit papers over the weekend, containing stances on some key negotiation points, EU officials have expressed disappointment with the papers.
The EU’s Brexit chief negotiator, Michel Barnier, asked Britain to begin negotiating more seriously, while European Commission President Jean-Claude Juncker indicated he was unsatisfied by the lack of certain details in the report.
Sterling hasn’t seen notable support from domestic data either. UK mortgage approvals came in at 68.69k in July, better than the forecast 65.5k and the previous 65.32k. Mortgage lending was slightly higher than the forecast £3.5b, coming in at £3.6b.
The July Bank of England (BoE) consumer credit came in lower-than-expected at £1179m. Year-on-year net consumer credit was at its slowest rate since April 2016, but was still at elevated levels.
Overall, the data didn’t give investors any new reason to buy the Pound, but some analysts predict Sterling’s current weakness against the Euro may not last much longer. According to Derek Halpenny, European head of global markets research from the Bank of Tokyo-Mitsubishi;
‘While the negative Brexit sentiment could certainly take the Pound lower still over the coming weeks, a continued slide in the pound NEER [nominal effective exchange rate] value assumption – currently averaging 76.650 on a year-to-date basis – would start to add to the inflation overshoot. If the economic data was to show some improvement, then that combination would help provide support for the Pound.
So we remain sceptical of how much further scope there is for Pound selling.’
Euro (EUR) Supported by Confidence Stats and ECB Speculation
Euro demand has persisted due to ongoing speculation that the European Central Bank (ECB) is edging closer towards taking a more hawkish tone on monetary policy.
Strong Eurozone ecostats and a lack of dovish commentary from the bank have left traders hopeful that likely discussions on quantitative easing (QE) in the coming months will lead to an announcement of QE withdrawal.
ECB President Mario Draghi held a speech at the monetary policy symposium at Jackson Hole last week and offered no fresh forward guidance on the Euro or the bank’s monetary policy outlook.
This indicated to markets that the Euro’s strength may not impact the bank’s monetary policy plans as much as some analysts feared.
Eurozone ecostats have helped to support the shared currency too. While Spain’s August inflation rate fell short of forecasts, the Eurozone’s August confidence surveys largely beat expectations.
August business confidence was forecast to improve from 1.04 to 1.06 but jumped to 1.09. Services sentiment, economic sentiment and industrial sentiment all beat forecasts too.
The final consumer confidence print for August came in at -1.5 as projected however.
Pound Euro Exchange Rate Forecast: Key Eurozone Data Ahead
Most of the week’s most influential Eurozone ecostats are still ahead, with Thursday seeing the publication of multiple key prints.
German employment results from August and the Eurozone’s overall July employment report will be published, as well as German retail sales stats from July and Italian and Eurozone inflation projections.
The Eurozone inflation figure is forecast to have improved from 1.3% to 1.4% year-on-year.
If it beats expectations, investors will become even more confident that the European Central Bank (ECB) could take a more hawkish tone and begin to withdraw its quantitative easing (QE) measures over the coming months.
Notable data will be published on Friday too. Markit will be publishing its final August manufacturing PMIs, for both the Eurozone bloc and the UK.
If UK manufacturing beats expectations, this could help the Pound Euro exchange rate to recover from its recent weak streak.
GBP EUR Interbank Rate
At the time of writing this article, the Pound Euro exchange rate trended in the region of 1.0810. The Euro to Pound exchange rate traded at around 0.9245.