September Eurozone Consumer Price Index Confirmed to be Negative, GBP/EUR Exchange Rate on Narrow Uptrend
Inflation in the Eurozone was confirmed to have turned negative in September with the finalised Consumer Price Index, however this has been of relatively limited impact on the Euro (EUR) this morning. In response the GBP/EUR exchange rate has continued to trend narrowly in the range of 1.3615.
Movement on the GBP/EUR exchange rate is relatively limited this morning, with the only major domestic data of influence likely to be the finalised September Eurozone Consumer Price Index.
7-Year Low UK Unemployment Rate Spurred Pound (GBP) to Bullish Gains, Euro (EUR) Declined on Volkswagen Worries
Mid-week the GBP/EUR exchange rate was substantially buoyed by the release of a raft of UK employment data. While the Jobless Claims Change figure was more disappointing than expected, showing a rise of 4,600 rather than the anticipated fall of 2,200, this was counteracted by a surprise decline in the ILO Unemployment Rate. Clocking in at 5.4% this was the lowest domestic unemployment reading in seven years. As Average Weekly Earnings also continued to improve in the three months to August, traders speculated that this could increase pressure on the Bank of England (BoE) to raise interest rates in the nearer-term.
As the Eurozone Industrial Production figure for August was revealed to have been weaker than forecast, falling to 0.9% instead of showing a minor uptick to 1.8%, the appeal of the Euro (EUR) declined. The resultant slump was worsened on Thursday by the revelation that Volkswagen would be recalling 8.5 million vehicles in Europe in order to remove the illegal ‘defeat devices’. With confidence in the German economy taking another blow, this pushed the GBP/EUR pairing to a weekly high of 1.3617.
Upcoming Eurozone Consumer Price Index Data Unlikely to Provoke Significant Euro (EUR) Volatility
With no fresh UK data due for release today the major influence on the GBP/EUR exchange rate stands to come from the finalised Eurozone Consumer Price Index for September. Although this figure, in itself, is not expected to deviate from the provisional number released earlier the lack of change could be enough to spur the common currency up somewhat. If European stock markets continue to rally on the reduced prospect of a 2015 Fed interest rate hike and reduced chances of imminent European Central Bank (ECB) monetary loosening measures, the Euro could also stand to make gains.
GBP/EUR Exchange Rate Forecast: Pound could Gain on Decreased UK Public Sector Net Borrowing Figure
After the weekend Sterling could produce another rally on the back of the Rightmove House Prices and the latest UK Public Sector Net Borrowing figures, should these print strongly. If the domestic public debt shows improvement upon the previous month’s disappointingly large number then there could be increased demand for the Pound.
Major Eurozone data will be a little thinner on the ground in the early week, although Thursday will likely see some strong Euro volatility with the ECB Rate Decision for October. While the central bank is not expected to vote to change interest rates, if the tone of policymakers proves to be more dovish then traders could be inclined to move away from the single currency.
Current GBP, EUR Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was on a narrow downtrend in the range of 1.3604, while the Euro to Pound Sterling (EUR/GBP) was climbing in the region of 0.7348.