Upturn for Euro (EUR) Today as Pound (GBP) Sentiment Remains Muted
In spite of the German Import Price Index for August having printed at a slightly larger contraction than had been anticipated the GBP/EUR exchange rate is on a downtrend this morning, in the region of 1.3492.
Global slowdown fears continue to hang over the GBP/EUR pairing today as the declining odds of a near-term Bank of England (BoE) interest rate rise are outweighed by the prospect of fresh European Central Bank (ECB) stimulus measures.
Limited Demand for Sterling (GBP) saw the GBP/EUR Conversion Rate Sink to a Four-Month Low as Euro (EUR) Dominated
Ahead of the weekend the Pound (GBP) was on bearish form after both the UK’s Public Sector Net Borrowing and BBA Loans for House Purchase for August proved disappointing to traders. Members of the Monetary Policy Committee (MPC) also helped weigh down the currency, as comments were made to suggest that a Bank of England (BoE) interest rate raise would not be on the table until the second or, more likely, third quarter of next year. This lack of support for Sterling saw the GBP/EUR exchange rate fall substantially throughout the week to slip from a monthly best of 1.3888 to a four-month low of 1.3504.
While concerns over the Volkswagen emissions scandal have raised some serious questions over the prospects of the Eurozone’s economic powerhouse and, consequently, the single currency (EUR), this failed to be of particular benefit to the soft Pound. In no small part this was likely due to the relatively hawkish outlook of the European Central Bank (ECB), after President Mario Draghi stated that policymakers saw little reason to introduce fresh monetary loosening measures at this juncture. Nevertheless, sentiment towards the Euro undeniably began to weaken in the wake of hawkish Fed commentary and the widening threat of the Volkswagen crisis.
Bank of England (BoE) Rate Rise Hopes Diminished Today, Single Currency (EUR) Bearish with Continued Volkswagen Pressure
Following up on the dovish tone of some MPC members, the Centre for Economics and Business Research has now revised its forecast for a BoE rate hike, pushing back predictions from February to May. As the global economic slowdown has been showing no signs of improvement and Chinese Industrial Profits declining by 8.8% to worsen the picture of the manufacturing sector of the world’s second largest economy, the case for a rise certainly appears diminished.
Although Sunday’s Catalonian regional elections yielded power to secessionist parties, who have vowed to fight for independence from the central Spanish government, this does not appear to be particularly concerning traders. However, as pressure continues to mount on Volkswagen and the automobile industry in general, the Euro has begun to cede back some of its recent gains.
GBP/EUR Exchange Rate Forecast: Lowering German Inflation could Prompt Slump for Euro
Movement is likely to be livelier in the GBP/EUR currency pair tomorrow, with the release of both the August Mortgage Approvals figure for the UK and the September German Consumer Price Index data. Should inflation in the Eurozone’s major economy prove to be more disappointing than expected by printing below the forecast slip from 0.2% to 0.1%, the common currency may see a substantial downturn. Decreased growth in inflation, and the impact such a shortfall would have upon the chances of the ECB meeting its multi-year target of 2% would suggest that monetary loosening could still be a possibility and weigh heavily on the Euro.
Current GBP, EUR Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate is on an uptrend in the region of 1.3610, with the Euro to Pound Sterling (EUR/GBP) pairing continuing to retreat at 0.7347.