Euro (EUR) Dovish Today ahead of European Central Bank (ECB) Rate Decision News
Sentiment towards the Pound (GBP) has remained relatively strong overnight, with the Euro (EUR) on a downtrend ahead of today’s European Central Bank (ECB) Rate Decision. As such the GBP/EUR exchange rate is trending in the region of 1.3641.
An improved UK Public Sector Net Borrowing has helped to shore up the Pound (GBP), although the prospects of the GBP/EUR exchange rate have remained muted in light of recent blows to the domestic steel industry.
Fresh UK Steel Industry Job Losses Weakened Sterling (GBP), Euro (EUR) Strengthened in spite of Weak German Data
Sentiment towards the Pound (GBP) began to sour yesterday with the news that Tata Steel would be mothballing several of its UK facilities and cutting 1,170 jobs as a result. Coming hot on the heels of the Redcar steelworks closure and the revelation that steel products group Caparo Industries had entered administration, this raised concerns that the domestic steel industry could now be in a state of terminal decline. Increasing pressure on the strength of the wider UK economy, this loss of manufacturing capacity was seen to further reduce the odds of a near-term interest rate rise from the Bank of England (BoE).
In spite of German Producer Prices falling further than forecast in September, contracting by -2.1% rather than -1.8%, the single currency (EUR) nevertheless made gains throughout Tuesday. While this latest sign of weakness within the Eurozone’s powerhouse economy could have been seen as further impetus for the European Central Bank (ECB) to introduce new monetary loosening measures, traders were somewhat dismissive of the possibility.
UK Public Sector Borrowing Narrowed to Boost Pound (GBP) Today, GBP/EUR Pairing Makes Gains
The GBP/EUR exchange rate saw a surge in value this morning as the UK Public Sector Net Borrowing figure for September printed lower than forecast. Showing that the government deficit had narrowed to 8.6 billion Pounds on the month, rather than the 9.6 billion that pundits had been anticipating, this lent some strength back to Sterling today. Although this figure does remain higher than investors might like it nevertheless demonstrates a solid improvement within the domestic economy, boosting hopes that the BoE might be more inclined towards an increase in interest rates. However, the continuing impact of yesterday’s industrial losses continues to hang over the prospects of the Pound, preventing the GBP/EUR pairing from entering an especially bullish run.
GBP/EUR Exchange Rate Forecast: UK Retail Sales May offer Further Rallying Point
Thursday’s ECB Rate Decision may provoke some volatility for the Euro, although any attempts from President Mario Draghi to talk down the common currency could fail to produce the desired impact due to an increasing trader apathy. Should the Eurozone Consumer Confidence Index reading prove dovish, however, the single currency could enter a fresh downturn.
UK Retail Sales, meanwhile, are expected to show a decided improvement upon the year with growth of 4.8% forecast. If consumer demand is demonstrated to have picked up in September then this could potentially spur the Pound to further gains. Any further developments regarding the future of the domestic steel industry are also likely to have some impact upon the outlook of Sterling.
Current GBP, EUR Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was on a limited uptrend in the range of 1.3616, while the Euro to Pound Sterling (EUR/GBP) pairing slumped around 0.7344.