Pound Sterling to Euro (GBP/EUR) Exchange Rate Declines before ZEW Data
The Pound was trading in a softer position against both the Euro and US Dollar on Tuesday.
Sterling lost 0.4% against the common currency and 0.3% against the ‘Greenback’, edging below 1.40 and 1.48 respectively.
In the hours ahead the Pound could extend declines against the Euro if the ZEW economic sentiment surveys for the Eurozone and Germany show improvement.
The US Housing Starts and Building Permits figures are likely to impact the direction taken by the GBP/USD pairing.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3957
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in the region of 1.4780
GBP/EUR Exchange Rate Back to 1.4000 After House Price Data
The beginning of the week saw the Pound Sterling to Euro (GBP/EUR) exchange rate trading in the region of a seven year high. The Pound also clawed back some losses against the US Dollar after hitting a 4 1/2 year low against the North American asset at the close of last week.
The UK’s Rightmove House Price report showed a solid increase in domestic property prices.
As well as softening against the Pound, the Euro eased lower against several of its other main peers, hitting a record low against the New Zealand Dollar.
According to industry expert Peter Cavanaugh; ‘The quantitative easing is having the intended consequence on the currency. European investors are exiting the euro for higher returns elsewhere and you are also seeing foreign investors jumping in and buying into the Eurozone sharemarkets which are going to benefit from this amount of free cash but they are hedging their currency exposure, so therefore the money that is coming in is currency neutral and the money that is coming out is Euro negative.’
Later today ECB President Mario Draghi is due to give a speech in Frankfurt.
The tone of his comments could impact GBP/EUR trading.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.4024
Next week the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates could extend declines if the Bank of England (BoE) meeting minutes push back interest rate hike expectations.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Edges Below 1.40, GBP/USD Hits Fresh Lows before Employment Data
At the close of a fairly volatile week of trading, the Pound Sterling to Euro (GBP/EUR) exchange rate returned to trending in the region of 1.40 having fallen from a high of 1.42 as a result of profit taking, easing ‘Grexit’ concerns and bets that the Euro’s decline was overdone.
Although the negotiations between Greece and its creditors are rumbling on (and despite the fact that the Hellenic nation is having frequent spats with Germany) investors now see a smaller chance of a ‘Grexit’ then they did a few weeks ago, and the Euro is benefiting.
According to one industry expert; ‘It doesn’t make sense to have a Greek exit. There would be massive contagion.’
While speaking to Bloomberg, he argued that ‘borrowing costs would soar for nations such as Italy and Spain and Europeans would race to withdraw cash from their bank accounts […] Even Germany – Greece’s main nemesis as it negotiates a new financial aid package from European leaders – recognises this risk’.
The pairing briefly touched a low of 1.39 following the publication of below-forecast UK Construction Output data but recouped some of these losses before the close of trading.
The construction measure is notoriously volatile so isn’t considered to offer a reliable indication of economic performance.
Demand for the Euro remains limited as a result of the European Central Bank’s (ECB) quantitative easing programme, but the common currency has the potential to rally against its British peer over the course of next week depending on the tone adopted by the BoE in the latest batch of meeting minutes.
Bank of England (BoE) Meeting Minutes Could Dictate the Direction Taken by the Pound Sterling (GBP) Exchange Rate
This week the Bank of England (BoE) is scheduled to publish the minutes from its most recent policy meeting.
Last year two of the nine members of the Monetary Policy Committee grew bullish and began voting in favour of an immediate increase in rates.
However, after the price of oil tumbled and domestic inflation bombed, these officials withdrew their support for an adjustment to borrowing costs.
That being said, expectations regarding BoE rate hikes have risen in recent weeks as Governor Mark Carney intimated that lower inflation rates wouldn’t deter the central bank from altering policy at the beginning of next year.
Although Carney backtracked a little on Thursday (by implying that the strength of the Pound could have a detrimental impact on consumer prices and prevent a rate hike) the minutes from the last gathering may prove Pound supportive.
Any references to inflation rebounding by the end of the year could give Sterling a leg up and help it return to its recent 7-year high of 1.42 against the Euro.
Conversely, indications that record low rates could remain in place beyond the middle of next year would weigh on the British asset.
The Pound’s performance against the US Dollar may prove to be less impressive though as the Federal Open Market Committee is set to deliver its latest interest rate announcement.
If the Fed removes the word ‘patient’ from its references to the projected timeline for the raising of interest rates the Pound Sterling to US Dollar (GBP/USD) exchange rate could drop to fresh lows.
The UK’s employment data will also be influential this week.
An impressive jobs gain or decline in unemployment would bolster the GBP/EUR and GBP/USD pairings.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Decline if ZEW Sentiment Surveys Impress
Of course, economic reports from both the Eurozone and US will also have an impact on GBP/EUR and GBP/USD trading in the days ahead.
ZEW is due to release economic sentiment surveys for both Germany and the Eurozone at the beginning in the week.
These confidence gauges are often influential and improved readings may see the Euro gain on the Pound.
At the close of the week the Euro to Pound Sterling (EUR/GBP) exchange rate was trading in the region of 0.7108, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in the region of 1.4739 and the Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.4031