GBP/EUR Flat Ahead of ECB Rate Decision
The GBP/EUR exchange rate trended in the region of 1.2540 during Friday’s session as investors refrained from making any big movements as the weekend approached.
Influence-light data released on Friday morning had little to no effect on the pairing. British construction output came in below forecasts, scoring 0.3% in February despite forecasts of 0.7%, but did manage to escape the previous contraction of -0.9%.
Eurozone trade balance also scored poorly, showing a surplus of 20.2b despite forecasts that January’s 22.8b would only worsen to 21.5b.
Investors remain wary of the pair amid ‘Brexit’ concerns and ahead of next week’s ECB rate decision.
- BoE Holds Rates Again – Key rate held at 0.50% as expected
- Slower Growth in Post-‘Brexit’ UK? – Bank of England warns of serious harm
- Eurozone CPI Optimistic – Minimal EUR gains despite better-than-expected YoY score
- Forecast: IMF Meeting Begins Today – ECB Survey of Professional Forecasters also due
UK Construction Output Disappoints but GBP/EUR Holds Gains
The Pound Sterling to Euro exchange rate remained up 0.3% on the day’s opening levels despite the UK’s construction output report disappointing.
Economists had forecast that construction output would come in at 0.0% on the month and 0.7% on the year in February, but it actually printed at -0.3% and 0.3% respectively.
Industry expert Howard Archer said of the result; ‘Despite construction output dipping for a second month running in February, it still looks likely that construction saw some growth in the first quarter of 2016. [However] With output muted over the first two months of the year and March survey evidence from both the purchasing managers and the Bank of England’s regional agents soft, it does appear that the construction sector is currently finding life hard going.’
However, with the Eurozone’s trade figures also falling short of forecasts, the Pound retained the upper hand in the GBP/EUR pairing.
The Pound to Euro exchange rate is currently trading in the region of 1.2586.
The Pound Sterling to Euro (GBP/EUR) exchange rate dipped slightly on Thursday, but losses were limited and have left the pairing considerably higher than the week’s opening levels overall as Eurozone worries become more entrenched.
The pair opened at 1.2395 this week, near a two-year low. Investors bought into the Pound on profit-taking and it has since appreciated over 140 pips against a weakening Euro. At the time of writing, the pair trended in the region of 1.2554.
While most of the week’s major economic releases have already been published, the GBP/EUR exchange rate could still experience a final flurry of movement before the weekend.
Bank of England (BoE) Unanimously Leaves Rates, Warns of ‘Brexit’ Harm
The Bank of England’s monthly key rate decision took place during Thursday’s session and central bank policymakers once again unanimously decided to keep the interest rate at 0.50%. The rate has now been on hold for over seven years.
The decision didn’t influence GBP/EUR considerably as the result has become expected by investors by now. However, the BoE’s minutes revealed their strongest warnings yet over what could transpire in the event of Britain leaving the EU after June’s referendum.
Reuters reports the BoE as saying that a ‘Brexit’ would likely cause a considerable slowing of growth;
‘”This uncertainty would be likely to push down on demand in the short run… (and) have significant implications for asset prices, in particular the exchange rate.”
For the first time, rate setters said that they had seen signs that the upcoming vote was affecting business decisions, with a striking fall in commercial property sales, delayed investment and fewer company listings.
“This might lead to some softening of growth in the first half of 2016,” they said.’
Positive Eurozone CPI Holds Back Sterling (GBP), Gives Euro (EUR) Solid Footing
The anticipated Eurozone Consumer Price Index (CPI) report released on Thursday morning printed largely as expected, with the month-on-month score of 1.2% meeting forecasts.
The key year-on-year print, on the other hand, scored above analyst expectations and left contraction. The report came in at 0.0% despite forecasts of -0.1%.
Unfortunately for the Euro, Wednesday’s poor industrial production data and continued rows involving the European Central Bank’s (ECB) easing methods have prevented positive data from making a considerable dent against the Pound.
The ECB weathered criticisms from German Finance Minister Wolfgang Schaeuble last weekend, who blamed the central bank for increasing right-wing mentalities in Germany.
Other German economic institutes have since come out in support of the ECB, the Financial Times reports, calling the low rates and easing measures appropriate for stimulating economic growth.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: IMF and WBG Due to Meet
The GBP/EUR pair may experience fluctuations as the week draws to an end, with all vital datasets already released and investors continuing to adjust their positions.
In a week that saw the extremely volatile Pound sustaining considerable gains and investors finally beginning to take European Central Bank (ECB) concerns to heart, the GBP/EUR pair seems likely to trade flatly.
While investors may partake in light trade in response to the UK’s construction output or Eurozone trade balance data due later today, forex markets may also have their eyes set on a meeting involving the International Monetary Fund (IMF) that begins tomorrow.
The IMF and World Bank Group (WBG) ‘Spring Meetings’ will last through the weekend. The Washington DC meeting invites press and economists to a series of press conferences and events focused on the world’s economies and financial markets.
The ECB is also due to release its latest Survey of Professional Forecasters today, a ‘quarterly survey of expectations’ for various inflation and growth issues within the Eurozone.