Declining German Producer Prices put Dent in Euro (EUR) ahead of European Central Bank (ECB) Rate Decision
Yesterday’s bullishness has started to wear thin as the GBP/EUR exchange rate holds a narrower uptrend this morning, boosted by an unexpectedly severe contraction on the year-on-year German Producer Prices figure. With investors cautious ahead of Thursday’s European Central Bank (ECB) Rate Decision the GBP/EUR conversion rate is currently trending in the region of 1.3658.
While UK House Prices were shown to have slowed the GBP/EUR exchange rate has remained on a positive trend this morning.
Hawkish Bank of England (BoE) Comments Boosted GBP/EUR Exchange Rate, Negative Eurozone Inflation Confirmed
Ahead of the weekend the common currency (EUR) was offered some slight support by the release of the finalised Eurozone Consumer Price Index for September, which failed to differ from the provisional figure of -0.1%. While this did confirm that the currency union is in a state of negative inflation the Euro remained on a positive trend against rivals, with traders unfazed by the potential for fresh European Central Bank (ECB) monetary loosening that this weak level of inflation could spur.
Nevertheless, the Pound (GBP) regained some ground on Friday thanks to comments by Monetary Policy Committee (MPC) member Kristin Forbes. Indicating that she believes global slowdown fears to be overdone and that the Bank of England’s next move towards monetary tightening could come sooner rather than later, Forbes hawkishness reflected an increasing split within the MPC. Reacting favourably to the potential for a greater division in votes at the next BoE policy meeting pundits were inclined to buy back into Sterling, with the GBP/EUR exchange rate ending the week in the region of 1.3604.
Slowing House Prices Fail to Dent Pound (GBP) Today, Euro (EUR) Trending Cautiously ahead of Eurozone Construction Data
Although the UK’s Rightmove House Prices figure for October showed slowing growth, down to 5.6% on the year from 6.4% in September, this did not appear to particularly diminish the appeal of the Pound. Likely this is due to the continued optimism inspired by Forbes’ comments, as a better-than-expected third quarter Chinese GDP released this morning suggests that the economic slowdown could in fact be less severe than previously thought.
In advance of this morning’s August Eurozone Construction Output data the Euro is experiencing somewhat cautious movement, as investors offer a mixed reaction to the less dovish than anticipated Chinese GDP result. Suggestions that the figure may not accurately reflect the current condition of the world’s second largest economy have kept markets from entering a true mood of risk appetite to the benefit of the safe-haven currency. As Construction is expected to have fallen on the month within the Eurozone, however, the single currency could soon turn more substantially dovish.
GBP/EUR Exchange Rate Forecast: Pound Hoping to Strengthen Further on Upcoming Public Sector Borrowing Figure
Tomorrow is expected to see the start of the first creditors’ review of Greece, the result of which will decide whether the country has made enough progress on its mandated reforms in order to see the release of another tranche of its 2 billion Euro bailout package. Should it be suggested that the next injection of capital is imminent, the single currency could appreciate across the board.
Wednesday’s Public Sector Net Borrowing figure will be of particular importance for Sterling, with the potential for a rally should government debt be shown to have narrowed on August’s unexpectedly large 11.3 billion Pound deficit. A weaker performance here, on the other hand, would be sure to see the GBP/EUR exchange rate enter a renewed slump.
Current GBP, EUR Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the range of 1.3619, while the Euro to Pound Sterling (EUR/GBP) pairing was in a downtrend around 0.7340.