Pound to Euro Exchange Rate Continues to Tumble as Euro Strengthens
Despite some relatively relieving UK data published today, the Pound Sterling to Euro (GBP/EUR) exchange rate couldn’t find the footing to recover from its worst levels in a month due to the day’s fresh Euro (EUR) strength.
Following last week’s tight GBP/EUR movement, which saw the pair ultimately remain in the region of 1.1233, GBP/EUR has seen more bearish movement this week.
Losses were slow earlier in the week, but since Tuesday’s rise in Brexit jitters GBP/EUR has fallen faster.
At the time of writing on Thursday, GBP/EUR trends near a low of 1.1102, which is the pair’s worst level in a month. Sterling (GBP) movement has been mixed, making it easier for a stronger Euro to advance.
Pound (GBP) Exchange Rates Fail to Find Support in UK Growth Report
The Pound remained weak against many major rival currencies today, despite Britain’s latest Gross Domestic Product (GDP) growth rate beating forecasts in a key print.
Britain’s August growth rate came in with a disappointing contraction of -0.1% month-on-month, but the three month figure was a stronger than forecast 0.3%.
It left economists more convinced that Britain’s economy had avoided falling into a technical recession in Q3 2019.
Another better-than-expected U.K. GDP report. August's 0.3% 3m/3m% growth rate bettered the 0.1% rate expected by the consensus. Momentum in the services sector still in tact, despite the Brexit fiasco. Still no "hard" data supporting the case for the MPC to cut Bank Rate pic.twitter.com/rQ4LflScUq
— Samuel Tombs (@samueltombs) October 10, 2019
However, amid this week’s fresh fears that UK-EU Brexit negotiations are on the cusp of totally collapsing, the stronger than expected growth data was largely overshadowed and the Pound remained unappealing overall.
This made it easier for a strong Euro to keep GBP/EUR near its worst levels.
Euro (EUR) Exchange Rates Advancing on European Central Bank (ECB) Speculation
Concerns that Germany’s economy fell into a technical recession in Q3 2019 continue to keep notable pressure on the Euro outlook, but the shared currency advanced today.
Investors were more bullish on the Euro following reports that European Central Bank (ECB) President Mario Draghi ignored advice and objections from other ECB officials in announcing the bank’s latest quantitative easing (QE) scheme.
The account of the latest ECB decision reflected this, saying:
‘A number of reservations were expressed about individual elements of the proposed policy package’
This bolstered speculation that the ECB may not be as dovish as expected in its Eurozone economic outlook going forward.
On top of this, the Euro has also been benefitting from weakness in its biggest rival, the US Dollar (USD), as well as news that the EU was likely moving ahead with plans for some kind of Eurozone budget.
Pound to Euro (GBP/EUR) Exchange Rate Could Recover if German Inflation Disappoints
As it stands, the Pound to Euro (GBP/EUR) exchange rate is on track to lose over a cent this week overall unless its current trajectory changes over the next day.
The Pound outlook is currently weighed by Brexit uncertainties, and unless UK-EU Brexit negotiations are able to properly resume this is unlikely to change.
If Brexit developments see signs of improvement before the weekend though, the Pound could see a late-week recovery effort.
GBP/EUR would recover even more easily if Germany’s final September inflation rate report disappoints investors tomorrow.
In what will be one of the week’s most notable German datasets, inflation is projected to have slowed to 1.2% last month.
If German inflation falls short of forecasts, the Euro could weaken as investors will speculation that the European Central Bank (ECB) could still become more dovish.
On the other hand though, the Pound to Euro (GBP/EUR) exchange rate could be in for further losses before the end of the week if Germany’s inflation rate surprises to the upside.