The Pound Euro (GBP EUR) exchange rate continues to react to poor economic data, weakening below opening levels even though the Euro has been softened by poor French, Italian and Irish inflation figures.
- Update: Markets dovish ahead of UK production and trade data – Pre-Brexit data could soften economic outlook
- GBP EUR exchange rate weak on BoE stimulus – Markets still reacting to QE and more
- Pound left without support – No domestic data released
- Euro strengthens on German industry – Stronger-than-expected production figures
- GBP EUR forecast – Pre-Brexit production and trade to move exchange rates
Bullish Performance from German Economy Weakens Pound Euro (GBP EUR) Exchange Rate
Second-quarter GDP figures for the German economy have cheered investors today, showing an above-forecast level of economic growth. An upwards revision in the previous working day adjusted (WDA) and non-seasonally adjusted (NSA) figures meant that the former clocked in at 1.8% instead of 1.4% (a -0.1% slowdown on previous figures) and the latter leapt from 1.5% to 3.1%.
(Last updated 09.00, 12/08/2016)
UK Housing Market Softens; Pound Euro Below Opening Levels
Fewer surveyors than expected saw a rise in property prices in the UK during July. July’s RICS House Price Balance fell to show a net of just 5% of surveyors saw house prices increase last month. This was the result of a -10% drop; analysts had predicted the extent of the fall, but because June’s figure was revised lower, the end result printed -1% below expectations. The Pound Euro (GBP EUR) exchange rate is struggling around opening levels at 1.16.
(Previously updated o8.55, 11/08/16)
Pound Euro Soft as Markets Await Bank of England QE Update
After dipping on Monday and Tuesday, the Pound Euro exchange rate remained soft on Wednesday, with the threat of further policy easing from the BoE seriously limiting demand for the British currency. The Euro, meanwhile, was benefiting from a weakening in the US Dollar.
The Bank of England’s (BoE) asset purchasing programme hit an unexpected bump in the road yesterday when the BoE failed to find enough investors willing to sell the target number of bonds. The BoE was looking to purchase £1.17 billion of bonds dated above 15 years, but the markets were only willing to sell £1.12 billion worth. This could cause significant problems for the BoE in its attempts to boost the UK economy should this pattern continue in the long term. The Bank is intending to issue a statement in response to the shortfall imminently, so GBP EUR is trending softly until markets have heard from the central bank.
(Previously updated 08.50 GMT 10/09/2016)
The Pound Euro (GBP EUR) exchange rate fell by 0.4% on Tuesday as UK manufacturing production data fell short of forecasts.
Manufacturing Production printed at 0.9% year-on-year in June, down from May’s negatively revised figure of 1.5% and less than the 1.3% result forecast.
A separate report showed a notable widening in the UK’s trade deficit.
GBP EUR was left trending in the region of 1.1712, having recovered slightly from the day’s low of 1.1685.
(Previously updated 08:00 GMT 09/08/2016)
Further weakening the Pound Euro exchange rate was the latest gross domestic product estimate for the UK from the National Institute for Economic and Social Research (NIESR). The institute predicted that July’s GDP figure would show that economic growth in the UK would half following the Brexit referendum, advancing 0.3% against forecasts of 0.4% growth. As a result, the GBP EUR exchange rate plunged, recovery slightly towards the end of the session, although it still closed down around -0.4%.
(Previously updated 17.00 GMT 09/08/2016)
With no domestic data from the UK, investors were yesterday still reacting to the latest Bank of England (BoE) rate cut, keeping GBP EUR weak.
Record Low Yield for UK Gilts Ahead of Pre-Brexit Trade Figures
UK 10-year gilts have seen yields drop to an historic low of 0.592% ahead of today’s June production and trade data. The figures will continue to sharpen the picture of the UK’s economic health going into the forecast headwinds from the Brexit. Markets are anticipating bad news, turning their attention instead to government bonds. Record low yields means that gilt prices have been pushed higher thanks to the overwhelming demand for safe investments.
The Pound Euro (GBP EUR) exchange rate is currently down -0.2% at 1.1732.
(Last updated 08.45, 09/08/16)
Markets Still Focussed on BoE Stimulus Measures; Pound Weakens on Lack of Domestic Data
The Bank of England’s latest policy easing measures continued to weigh on the markets yesterday, as investors tried to understand the long-term implications of all the changes. The Monetary Policy Committee (MPC) had announced £70 billion in quantitative easing, including the purchase of £10 billion in corporate bonds, and a £100 billion Term Funding Scheme to help banks lend to consumers.
Strong indications that the BoE could cut interest rates further, potentially taking borrowing costs down to zero, weighed on the Pound outlook. The policy easing measures were boosting appetite for stocks, with the FTSE 100 hitting a fourteen-month high yesterday as foreign investors continued to pile into UK shares (weaker Pound exchange rates allow overseas investors to purchase more stock).
According to CIBC, the fall in the Pound was surprising, given how far above market expectations the Bank of England went;
‘The fall in Sterling by “just” -1.5% on the day to remain well above recent lows still is a little surprising.
That could partly be because positioning was already so skewed against the Pound. It could also be because analysts are doubting whether the economy will behave quite as badly as the BoE expects, with outperformance potentially seeing a rethink down the road. Certainly a lot of emphasis is being placed on the services PMI, which doesn’t always have a great correlation with GDP.
However, should the economy weaken we expect Sterling to follow suit and dip to the mid-1.20’s by year-end.’
Euro Strengthens on Positive German Productivity and Eurozone Confidence Data
Strong data helped to push the Euro higher yesterday. German industrial production grew by 0.8% on a seasonally-adjusted basis in June, beating expectations of 0.7% growth. The previous month’s decline was retrospectively revised lower to -0.9%. Yearly production accelerated from -0.4% to 0.5% on a non-seasonally adjusted basis, exactly as forecast.
In further positive news for the Euro, Eurozone investor confidence experienced a strong recovery in the August measure. The index had previously clocked in at 1.7 and was forecast to rise to 3, but instead climbed to 4.2. According to Sentix, the Eurozone economy is expected to experience a ‘slight upturn’, although Sentix’s Manfred Hubner noted;
‘The latest data is not a signal of the inherent strength of the Eurozone. From a macro perspective, the increase of Eurozone’s economic expectations is caused by the positive development of economic situations in other world regions. Most notably the improvement of the Asian ex. Japan region cheers investors’ economic expectations. Economic expectations of Asia ex. Japan have significantly increased. As a side effect, regained optimism positively affects expectations around the globe.’
Pound Euro (GBP EUR) Exchange Rate Forecast; Key Pre-Brexit Data to Move Pound
The Pound is likely to be moved by multiple pre-Brexit data releases today. These include industrial production, manufacturing production and trade balances. Production is expected to have strengthened in June, although investors may not react to this data with the usual buy-in. Pre-Brexit data is largely moot as the economic conditions going forward remain unknown, but stronger data will cause concerns in the market due to worries that the vote to leave the European Union may have undone recent economic progress.
For the Eurozone, German trade figures are set for release and are expected to show an increase in the trade surplus, which would boost the Euro.
GBP, EUR Conversion Rates
The Pound Euro (GBP EUR) exchange rate was trending around 1.1768, while the Euro Pound (EUR GBP) exchange rate was trending in the region of 0.8469, during yesterday’s European session.