Successful Bank of England (BoE) Stress Test Pushes Pound (GBP) Higher Today
This morning has seen the results of the Bank of England (BoE) stress tests published, revealing that all seven banks involved have passed. Although both Royal Bank of Scotland and Standard Chartered proved weaker than hoped this has not prevented the Pound (GBP) from making gains today. As a result the GBP/EUR exchange rate has been making gains in the region of 1.4265.
Despite weaker German Retail Sales the GBP/EUR exchange rate has been on a downtrend today, with disappointing UK Mortgage Approvals and dovish comments from a Bank of England (BoE) policymaker denting demand for the Pound (GBP).
GBP/EUR Exchange Rate Trended Lower as UK Net Trade Weakened to Eighteen-Year Low
Neither the Pound (GBP) nor the Euro (EUR) had an entirely positive day on Friday, as data from both sides of the Channel proved disappointing. German Import Prices were shown to have contracted in October both on the month and on the year, while Greece’s third quarter GDP slumped further than expected, from 0.3% to -0.9%. Fresh weakness from the Hellenic nation did little to reassure investors, particularly as the country’s latest bailout saga drags uncertainly on. Slowness within the Eurozone’s economic powerhouse was not seen to bode well ahead of the European Central Bank’s (ECB) latest policy meeting, with the announcement of fresh quantitative easing all but assured.
As scepticism mounted towards the viability of Chancellor George Osborne’s revised budget, as laid out in his Autumn Statement, the Pound was spurred lower by the publication of the UK’s third quarter GDP report. Growth was found to have slowed on the quarter, slipping from 0.7% to 0.5%, as the domestic economy failed to escape the influence of negative global headwinds. Of particular concern was the revelation that imports had accelerated far ahead of exports, resulting in the weakest net trade figure in eighteen years. As a result the GBP/EUR exchange rate softened ahead of the weekend, slumping to 1.4189.
Safe-Haven Demand Shores up Euro (EUR), Pound (GBP) Softened by Disappointing UK Mortgage Approvals
German Retail Sales disappointed this morning, with consumer demand having weakened further than expected to fall from 3.5% to 2.1% on the year in October. While this did not offer particular encouragement to investors ahead of Thursday’s ECB meeting the single currency was nevertheless shored up by increased risk aversion.
Conversely, Sterling has been weighed down further today by the UK’s latest Net Consumer Credit and Mortgage Approvals figures, both of which proved somewhat disappointing. Although mortgage approvals increased in October it was not by as much as traders had anticipated, indicating that the domestic housing market is not quite as strong as thought. As Bank of England (BoE) policymaker Gertjan Vlieghe has recently stated his reluctance to make any change to interest rates there has been little incentive to buy back into the Pound at the start of this week.
GBP/EUR Exchange Rate Forecast: German Inflation Uptick Predicted to Extend Euro Uptrend Today
The Euro could extend its current gains further this afternoon if Germany’s November Consumer Price Index is found to have strengthened as forecast. While any uptick in inflationary pressure is unlikely to avert the impulse for the ECB to ease monetary policy at this juncture, a stronger showing could still lessen the extent of any oncoming measures.
Tuesday’s Manufacturing PMIs could provoke further volatility for the GBP/EUR exchange rate, with a predicted slowing of expansion within the UK’s manufacturing sector likely to impact the appeal of the Pound.
Current GBP, EUR Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was on a downtrend around 1.4185, while the Euro to Pound Sterling (EUR/GBP) pairing made gains to trade in the range of 0.7049.