An unenthusiastically received UK GDP undercut the strength of Sterling (GBP) on Friday, however the GBP/EUR exchange rate began to regain ground as concerns over potential ECB deflation and Greece weighed on the Euro (EUR).
Euro (EUR) Weakened as Effects of Black Monday Diminished with Pound (GBP) Capitalising on Dovish ECB Comments
Although the single currency (EUR) was one of the few assets to benefit from last week’s Black Monday and the trader panic that ensued from the turmoil of the global stock markets, many of those gains were ultimately ceded after shares began to stabilise. Wednesday’s rather dovish comments from European Central Bank (ECB) Executive Board Member Peter Praet concerning the possibility of the ECB being forced to imminently loosen interest rates also dampened the Euro’s bullish run, driving away investors in search of higher yields.
With a strong result on the UK’s BBA Loans for House Purchase and better-than-forecast year-on-year Nationwide Housing Prices figure the prospects of Sterling (GBP) began to pick up more in the latter half of the week. However, neither of these ultimately managed to provide sufficient stimulus to send the GBP/EUR pairing back up to its pre-Black Monday levels, with only a relatively weak uptrend in value.
Greek Concerns Returning to Forefront as Stock Markets Stabilise, GBP/EUR Trending Stronger
Friday proved to be a rather more mixed day for the GBP/EUR pairing, however, after the Pound’s initial rally on an unexpectedly positive UK Consumer Confidence Survey was ultimately a very short-lived thing. While the domestic GDP data posted at the anticipated levels, traders were less than enthused by the figures, leading to suggestions that the UK economy still remains generally out of balance.
As the interim government of Greece was officially sworn in at the end of the week and the September election campaign kicked off concerns began to return to the near-term future of the Hellenic nation. With the polls implying that former Prime Minister Alexis Tsipras might ultimately struggle to secure a supportive, pro-bailout majority the chances for a positive October progress review by creditors seem to be somewhat diminished. Mounting pressure on the ECB over potential deflation was also doing nothing to reassure pundits, weighing on the Euro to the benefit of its rivals.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Common Currency Hoping to Rally on Eurozone Inflation Rate
Later today the Eurozone’s year-on-year Inflation Rate for August stands likely to stimulate some significant movement for the pairing, given the impact that the data will have upon any ECB interest rate decision. Should it manage to improve upon last month’s 0.2% figure, rather than falling to 0.1% as expected, the common currency could well experience another strong rally.
Tomorrow will be a rather busier day for Sterling, on the other hand, with the UK Manufacturing PMI and mortgage data for July due for release. After the worries raised last week over the economic health of the nation, with particular doubts hanging over the relatively weak manufacturing sector, these figures will have a distinct impact on the outlook for the GBP/EUR exchange rate.