GBP/EUR Pairing Falls Back as Market Optimism Flags Today, Stocks Resume Slide in Spite of Chinese Intervention
The turbulence appears to be far from over this morning as the European stock markets all opened to losses, with the initial boost in positive sentiment from the People’s Bank of China (PBoC) interest rate cut of 0.25% wearing off. Ahead of today’s UK BBA Loans for House Purchase figure the GBP/EUR exchange rate has resumed a tentative uptrend at 1.3637, having shed most of yesterday’s gains overnight.
Markets Claw Back Lion’s Share of Black Monday Losses as Panic Selling Passes, GBP/EUR Holds Strong
As the European stock markets close the majority appear to have regained almost all of yesterday’s losses, spurred partly by a 0.25% interest rate cut from the People’s Bank of China (PBoC) this afternoon. Nevertheless, a similarly strong showing from the FTSE 100 has allowed the Pound (GPB) to remain dominant, with the GBP/EUR exchange rate currently trending at 1.3761.
After benefitting strongly from the panicked trading of Black Monday the single currency (EUR) has begun weakening today, allowing the GBP/EUR exchange rate to enter an uptrend.
Three-month Low for GBP/EUR Exchange Rate on Black Monday as Euro (EUR) Attracted Risk-Averse Investors
Black Monday proved to be a relatively good day for the common currency (EUR) as traders bought into the comparative safe-haven amidst the rout of riskier commodity currencies. With the value of Chinese stocks plunging to multi-year lows the resultant atmosphere of concern and contagious sell-offs led to significant drops in markets around the world. Despite losses in European stocks the Euro attracted many investors seeking to weather the turbulence, along with the similarly secure Yen (JPY), which saw its value climbing dramatically across the board.
Although the Pound (GBP) mostly avoided damage it remained in a weaker position relative to its continental rival, particularly as the turmoil cemented expectations that a Bank of England (BoE) interest rate rise will ultimately have to wait until at least the first quarter of the next year. In consequence the GBP/EUR exchange rate tumbled to a three-month low of 1.3485 and remained generally bearish throughout the rest of the day.
Improvement on the Majority of Global Markets Today has lifted the GBP/EUR Pairing
Some of this global panic appears to have worn off overnight, however, with the Australasian and European stock markets beginning to rally and stabilise today. With a number of experts labelling the action a correction rather than a full-blow economic crisis the sentiment has settled as buy-backs drive recovery on a swathe of shares.
Away from the stock markets, the German IFO surveys posted unanimously positive results this morning. In particular the Current Assessment showed a marked increase from 113.9 to 114.8 with the trio of figures all demonstrating improvement in spite of expectations for stagnation or deterioration. While this should have given another boost to the Euro today’s change in direction for the markets has benefitted the Pound, shoring up the GBP/EUR pairing to set it on a limited uptrend.
GBP/EUR Exchange Rate Forecast: Further Stock Recovery Could Prompt Additional Conversion Rate Gains
Tomorrow’s UK BBA Loans for House Purchase could possibly prompt a more substantial resurgence for Sterling, providing the figure demonstrates an improvement in the domestic housing market. A shortfall though is likely to trigger another round of losses for the GBP/EUR pairing, particularly if today’s recovery on the FTSE 100 and markets in general fails to truly stick.
Word from board members of the European Central Bank (ECB) in Mannheim due over the coming day could stimulate another general shift towards the common currency, so long as the central bank appears justifiably confident and on top of the current situation. As economists caution on the level of recovery that the European stock markets are seeing, and the potential for further slips, the GBP/EUR exchange rate could stand to weaken again as traders may seek to consolidate their positions on the sturdier Euro.
Current GBP, EUR Exchange Rates
At time of writing the Pound Sterling to Euro (GBP/EUR) pairing is moving up at 1.3673, with the Euro to Pound Sterling (EUR/GBP) exchange rate in a downtrend in the range of 0.7314.