The Pound Euro exchange rate firmed to 1.16, up from the week’s lows of 1.15 and managed to hold that level following the Federal Open Market Committee’s (FOMC) interest rate decision.
As expected, the Fed opted to leave interest rates on hold, and while the central bank did hint that a rate adjustment could take place in December, the fact that the number of rate increases planned for next year may be less than originally intended has had a negative impact on US Dollar demand and inspired an increase in risk appetite.
- Pound Euro Exchange Rate Briefly Slips to 1.15 – Lowest levels since late-August
- Disappointing German Producer Prices Fail to Dent Euro – EUR gains on GBP regardless
- UK Public Sector Net Borrowing Report Published – Deficit increase reported
- Forecast: Preliminary Eurozone PMIs Due Friday – Euro could inspire GBP EUR movement
Pound Euro Exchange Rate Holds Ground on Thursday
The Pound Euro exchange rate fluctuated throughout Thursday’s European session, but generally remained close to Wednesday’s levels as both the Pound and the Euro increased in strength.
Sterling was bolstered thanks to comments made by hawkish Bank of England (BoE) policymaker Kristin Forbes, who stated that she did not believe the Brexit vote had caused considerable damage thus far, and that there was not a strong case for further monetary easing in the coming months;
‘For now, however, the economy is experiencing some chop, but no tsunami. The adverse winds could quickly pick up – and merit a stronger policy response. But recently they have shifted to a more favourable direction.’
This comment was enough to keep the Pound sturdy on Thursday afternoon despite some limpness earlier in the day. However, the Euro was also strengthened thanks to a US Dollar selloff, with EUR USD gaining almost half a cent in value.
As a result, GBP EUR fluctuated with relatively little direction throughout the day, but Friday’s session could see some more definitive movement depending on whether or not the Eurozone’s preliminary September PMIs impress markets.
(Previously updated 16:27 BST 22/09/2016)
The Pound Euro exchange rate approached a four-year low ahead of the Federal Reserve interest rate decision with GBP EUR tumbling all the way to 1.15. Should the Fed prove dovish and send US Dollar exchange rates lower, the Euro is likely to climb and the Pound could hit fresh lows against its common currency rival.
Pound Euro Exchange Rate Slightly Lower on Wednesday
The Pound Euro exchange rate attempted to hold its ground on Wednesday but ultimately trended with a downward bias as markets had dovish expectations for the day’s Federal Open Market Committee (FOMC) decisions.
News that Britain’s August public finances report had deepened the British deficit as a result of 10.1b of borrowing throughout the month didn’t exactly cheer markets despite the figure being less than the projected borrowing amount of 10.4b.
Investors were not even cheered by a report from the Office for National Statistics (ONS) stating that thus far, Britain’s economy had been little effected by June’s Brexit vote.
Instead, markets were more focused on the day’s central bank news from elsewhere in the world, as well as more bearish stances on the possibility of Britain staying within the European Union’s single market following the completion of its formal Brexit.
The Euro is likely to drive GBP EUR movement for the remainder of the week, as the Euro will be react more than the Pound on Wednesday’s Fed news and will also likely react to Thursday’s Eurozone consumer confidence figures and Friday’s preliminary Eurozone PMIs for September.
(Previously updated 14:12 BST 21/09/2016)
The Pound Euro exchange rate slumped on Tuesday as a lack of supportive UK data and a focus on this week’s central bank meetings undermined Sterling. GBP sentiment also waned on disappointing Brexit news.
UK ecostats have been in fairly short supply this week, and those which have been published have erred on the negative side, leaving the Pound open to taking a battering on the back of Brexit related issues and concerns.
GBP EUR briefly advanced to a high of 1.1713 during Monday’s session, but by the evening was trending closer to the week’s opening levels of 1.1650 once more. On Tuesday the pair plunged to its lowest levels since late-August, fluctuating just above 1.1590 for most of the day.
This was close to a four year low and one of the worst Pound Euro exchange rate levels recorded since the UK’s decision to Brexit from the European Union on June 23rd. While all is far from rosy in the Eurozone, it appears that BoE easing concerns and the prospect of a long, difficult departure from the EU is having significantly more impact than mixed ecostats from the currency bloc.
Investors Sell Pound (GBP) as ‘Hard Brexit’ Looks Likely
Sterling was sold off versus most of its major rivals on Tuesday as last week’s Bank of England (BoE) policy meeting, a lack of supportive UK economic data and the latest Brexit news weighed the Pound down.
Generally, the Pound simply lacked appeal to investors on Tuesday, due to few attractive factors to incentivise GBP investment. Instead, markets were largely focused on the US economy and Federal Reserve ahead of Wednesday’s session.
One of the biggest factors weakening the Pound on Tuesday was the latest concern over Britain’s vote to Brexit – that is, to officially withdraw from the European Union.
EU leaders reiterated previously held stances that the United Kingdom would not be able to pick and choose from certain European Union benefits following a Brexit. Bloomberg reported;
‘Sterling was the worst performer among 32 major peers after Czech State Secretary for EU Affairs Tomas Prouza said late Monday that the UK has “zero chance” of clinching an exit deal with both immigration curbs and free-market access. He’s the latest in a string of central and eastern European leaders to issue such warnings to Britain in the hope of maintaining their citizens’ ability to work in the country.
The UK currency was also undermined as traders used it as a way of betting on the Federal Reserve striking a hawkish tone when it announces its policy decision on Wednesday’
In recent weeks, this talk of a Brexit with certain EU bells and whistles still available has been called a ‘Soft Brexit’, but repeated comments from EU officials has led to a ‘Hard’ (or complete) Brexit being considered more likely, which has disappointed hopeful investors.
Euro (EUR) Holds Ground Despite German Producer Price Drops
The Euro was among the currencies able to capitalise on this week’s Federal Reserve focus and US Dollar weakness. Being the US Dollar’s most common trade partner, the Euro often advances when the ‘Greenback’ Dollar is sold.
Markets have been hoping for the Fed to hike US interest rates and the possibility of them doing so in September had previously caused the US economy to soak up a lot of attention from the foreign exchange market.
However, due to a continued slew of mixed to underwhelming data, analysts now believe the chances of a September rate hike are increasingly low.
Investors have been mixed on the US Dollar so far this week after selling the currency off on Monday. The Euro has gained much of its current strength from the drop in US Dollar demand.
The Euro even continued to hold its ground on Tuesday despite the day’s underwhelming ecostats.
While German producer prices are typically low-influence, the Euro’s position can’t have been helped by news that the print had contracted in August. The monthly score unexpectedly came in at -0.1%, but the yearly figure lightened from -2.0% to -1.6% as projected.
Pound Euro Exchange Rate Forecast to Fall if Fed Disappoints
Wednesday’s session is to be a big one for global markets. The markets’ eyes will be fixated on the US economy and Federal Reserve for the most part, but there will also be bustling reaction to the Bank of Japan’s (BoJ) latest rate decisions.
Britain’s most influential figures this week will be published on Wednesday morning, which may offer Sterling a little support if they impress.
Public sector net borrowing is expected to have worsened by 10.4b in August following July’s -1.5b surplus. If the final figure comes in at 10.4b or higher, the Pound could fall. Conversely, a smaller-than-expected deficit widening could give Sterling some support.
However, even with the Pound and Euro the day’s main event will likely be the Federal Open Market Committee’s (FOMC) decision.
The US Dollar is influential enough to cause considerable cross-flows throughout the day. If the USD strengthens due to a surprisingly hawkish Fed, EUR will weaken, potentially allowing GBP to advance.
Short positions on the Pound may be closed in favour of the ‘Greenback’ however, which could weigh on the Pound Euro exchange rate’s advance potential even if the Euro is weakened by a strong US Dollar.