The Pound Sterling to Euro (GBP/EUR) exchange rate has trended narrowly today, mostly on account of a mixed reaction to the UK annual inflation rate for August hitting 0% today.
Lack of Eurozone Confidence Balances Sterling’s Performance against Common Currency
Although the Pound (GBP) has been partially helped by the 0% inflation rate posting matching with forecasts expressed in the recently released Bank of England (BoE) minutes, Sterling has also been aided by a distinct decline in the influential ZEW surveys that cover the Eurozone and its nations. The German Survey of Economic Sentiment dropped below estimates by printing 12.1 points from 25 points, instead of the predicted 18.3 points. The Eurozone Survey, meanwhile, fell from 47.6 points to 33.3.
The next relevant releases to the pairing come from the UK with the release of the Claims, Earnings and Employment data. Predictions have been broadly positive for the results, so it remains a distinct possibility that Sterling will make a more prominent stand against the Euro (GBP/EUR) when the results come out tomorrow.
The Pound Sterling to Euro (GBP/EUR) exchange rate has risen by 0.3% today and given the scarcity of relevant economic publications, it seems likely that this rate will remain as such until tomorrow morning, at least.
Pessimistic PMI Predictions may Undo Current Sterling Advantage in GBP/EUR Pairing Tomorrow
Although they came out strongly positive for the Eurozone, the Industrial Production monthly and yearly results for July were unable to inspire any discernible amount of confidence in the Euro (EUR) today. As a consequence, the Pound (GBP) has retained its earlier lead of 0.3% against the single currency (GBP/EUR).
In the near future, the pairing will be most heavily impacted by the UK Consumer Price Indices (CPI) for August, out tomorrow. Unfortunately, little positive has been predicted for both the core and standard fields, so it remains to be seen if Sterling will hold onto its current advantage against the Euro.
The Pound Sterling (GBP) and the Euro (EUR) will both have the opportunity to eclipse their middling performances last week with decisive movements related to the respective UK and Eurozone economic releases over the next five days.
Exchange Rate News: Overall Rise in GBP/EUR Pairing Last Week despite Patchy Announcements
The Pound Sterling (GBP) had an overall positive performance last week against the Euro (GBP/EUR), although both currencies suffered from large gaps in the timing and importance of their economic publications. For Sterling, the week began in earnest on Wednesday with the release of the UK Trade Balance figures for July, along with the Industrial and Manufacturing Production numbers from the same month. Although the trade figures unfortunately met with estimates and showed an expansion of the UK trade deficit, the more surprising (and disappointing) revelation was in the Production figures. The annual Industrial result fell far below expectations of 1.5% to 1.4%, instead printing at 0.8%. The Manufacturing outcome was even worse as instead of posting a 0.5% increase, a -0.5% decline was the actual recorded number.
BoE MPC Supported Sterling with Positive UK Growth Forecasts for 2016 although Interest Rates Remained in Limbo
The biggest GBP news of the week came on Thursday, with the Bank of England’s (BoE) interest rate decision and their Monetary Policy Committee (MPC) minutes being released at the same time. As expected, the interest rate vote was identical to the previous month’s resolution, right down to the same MPC member, Ian McCafferty, solely voting for a rate rise. The words that gave Sterling a small boost were related to the MPC’s UK economic outlook. Views were broadly positive, with the most significant global event of recent months, the stock market meltdown in China, not appearing to have a noticeable detrimental impact on the UK’s growth prospects. However, it is worth mentioning that policymakers thought that while ‘Global developments did not yet appear sufficient to alter materially the central outlook’, ‘the greater downside risks to the global environment merited close monitoring for any impact on domestic economic activity’.
Juncker Speech was Biggest Blow to Euro in Scant Data Week
The Euro (EUR) performed on the underside of the pairing last week, mostly on account of a muted reception to positive Eurozone news and a scathing speech from European Commission (EC) President Jean Claude-Juncker on Greece’s past and future position within the Eurozone.
The common currency opened against the Pound (EUR/GBP) on Monday with a drop in the Eurozone Sentix investor Confidence score from 18.4 to 13.6 and a better-than-expected drop in the annual German Industrial Production figure for July from 0.9% to 0.5%. The next biggest event was on Tuesday with the Eurozone GDP; against forecasts of stagnation, the yearly figure rose from 1.2% to 1.5%. This was the last hurrah for the Euro however, as Wednesday and Thursday were devoid of significant economic releases and Friday only brought stagnant German CPIs for August.
Wednesday saw the most notable Euro decline in the EUR/GBP pairing with Juncker delivering a volley against any speculators who may have viewed Greece with complacency. Referring to the austerity and tight-budgeting required of the third Greek bailout, Juncker remarked that ‘It was important that [the Greeks] understood that they would not be saved at any cost]. Speaking pessimistically on Greece’s future, Juncker warned that ‘If this time rules agreed will not be respected, the reaction of the European Union and the Eurozone will be different’. This came at a time when Former Prime Minister Alexis Tsipras was structuring his re-election campaign on the grounds of ‘softening the edges’ of the bailout conditions.
GBP/EUR Exchange Rate Forecast: Tuesday is Focal Point for UK and Eurozone Economic Publications
The most important economic releases for the coming week will be the UK monthly and yearly inflation rate for August and the German ZEW Survey of Economic Sentiment for September which are scheduled for release on Tuesday. The day after, the key UK Earnings, Claims and Employment trinity is due to make an appearance, along with the Eurozone inflation rate for August. No predictions have been made so far for the outcomes.
Current GBP, EUR Exchange Rates
On the last day of the European trading session last week, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3681 and the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7311.