Euro Rebound Begins to Slow, Pound Pushes Back Despite Poor Retail Sales Figures
After the Euro regained some ground yesterday, the GBP/EUR exchange rate is currently trending narrowly as uncertainties continue to choke the common currency market. The UK posted poor Retail Sales figures this morning, with a -0.9% contraction in October and a worse-than-forecast drop in yearly growth to 3.0%. Despite this, the Euro is the weaker currency, with news coming in that a petition in Finland has reached the required number of signatures to force parliament to debate the country’s Eurozone membership.
The GBP/EUR exchange rate is currently trading narrowly around 1.4269.
After the terrible events of Friday significantly dampened investor confidence, the Euro has managed to recover some ground, partly thanks to a resolution of the Greek crisis and positive outlook on Europe’s economic future.
GBP/EUR Exchange Rate Trending Down Despite Positive Core Consumer Price Index
Like last week’s British labour market data, yesterday’s Consumer Price Index figures saw mixed results. While the CPI rose from -0.1% to 0.1% Month-on-Month (MoM) the rate remained fixed at -0.1% Year-on-Year (YoY). Disregarding volatile energy and food prices, the Core Consumer Price Index rose unexpectedly to 1.1%.
The figures, which all met or bettered expectations, saw Sterling make slight gains against the major currencies, with the GBP/EUR exchange rate hitting a three-month high of 1.4310. However, today has seen Sterling pare gains versus many of its rivals despite an absence of domestic data to provoke volatility.
The GBP/EUR exchange rate could be boosted by comments made by Deputy Bank of England (BoE) Governor Ben Broadbent, who has stated that the Monetary Policy Committee (MPC) should not devote all their efforts to raising inflation. ‘The Monetary Policy Committee doesn’t have a concern only for inflation and, depending on the circumstances, it will face trade-offs with other objectives. This means the horizon over which it’s appropriate to return inflation to target can vary,’ he explained in a speech on Wednesday. Broadbent voted to hold interest rates steady at the last MPC meeting, but his comments could suggest a shift in attitude towards a rise.
The GBP/EUR exchange rate is currently trending -0.3% down in the region of 1.4256.
EUR/GBP Exchange Rate Forecast: Euro Gains Amid Positive Economic Sentiment
Euro performance over the past few days has been poor as layer upon layer of Eurozone turmoil weakened demand for the common currency. The past month has seen a steady decline in the EUR/GBP exchange rate, which dropped from an 8-month high of 0.7463 in October to low of 0.6988.
The new upward trend has been caused by several factors. One of the most important is the resolution of disagreements regarding the next tranche of Greek bailout funding. €2 billion hung in the balance as creditors were unsatisfied with Greece’s implementation of the required economic reforms and Prime Minister Alexis Tsipras tried to negotiate conditions that would protect vulnerable homeowners from mortgage foreclosure. An agreement was reached yesterday and has unlocked the bailout fund and a further €12 billion to recapitalise the country’s banks.
The results of the Center for European Economic Research (ZEW) Survey showed that positive economic sentiment towards the German economy is growing. While attitudes towards the ‘Current Situation’ have dropped slightly from 55.2 to 54.4, ‘Economic Sentiment’ has risen from 1.9 to 10.4, well past the expected 6.0 mark. Sentiment towards the Eurozone economy as a whole fell from 30.1 to 28.3, but the Euro has likely been strengthened by the fact that a growing number of analysts (38.9%) believe that the common currency will appreciate in the next month.
The EUR/GBP exchange rate is currently trending between 0.6989 and 0.7020.
GBP/EUR Exchange Rate Forecast: Paris Still Weighing Heavily on Eurozone
While the Greek crisis has been resolved, the implications of the tragic attacks on Paris could continue to weigh the Euro down for some time. France has declared that it will no longer be able to meet EU budget targets next year as it increases spending on defence. The impact of a rising French deficit and fear over further attacks could harm both the tourism and retail sectors, which will likely halt the small rise the Euro is currently experiencing this morning.
The GBP/EUR exchange rate is currently trading down between 1.4233 and 1.4302.