Dovish Fed Prompted Fresh Euro (EUR) Boost, GBP/EUR Pairing Regaining Ground Today
After the Federal Open Market Committee (FOMC) opted to leave interest rates on hold last night the common currency (EUR) experienced a surge as traders moved away from the ‘Greenback’ (USD). Consequently the GBP/EUR exchange saw a significant slump yesterday, although this morning the pairing has regained most of its ground to trend positively in the region of 1.3650.
In spite of strong domestic unemployment data on Wednesday the GBP/EUR conversion rate is on a downtrend today due to weaker-than-expected UK Retail Sales.
Pound Sterling to Euro Exchange Rate News: UK Unemployment Bolstered GBP, EUR Hampered by Lower Inflation
Recent disappointments for the Pound (GBP) were generally eclipsed yesterday as a raft of UK unemployment data proved to be far more optimistic than anticipated. Of particular encouragement to traders was the unexpected fall in the domestic Unemployment Rate in the three months to July. Printing at 5.5% rather than 5.6%, this prompted a rapid turnaround in sentiment towards Sterling as speculation began to suggest that a Bank of England (BoE) interest rate hike might be closer than previously thought. Comments from BoE Governor Mark Carney assisted in this positive impression, as he asserted that the cycle of tightening could begin as soon as the first quarter of 2016.
Meanwhile, the single currency (EUR) was sent on a downturn as the Eurozone Consumer Price Index data printed poorly. Inflation in the currency union fell from 0.2% to 0.1%, a sign that recent economic headwinds and market turmoil have set the rate further away from the European Central Bank’s (ECB) ultimate target of 2%. As ECB President Mario Draghi had previously indicated that Eurozone policymakers are prepared to instate further monetary loosening measures to support and shore up the local economy, this news wasn’t considered quite as severe a surprise as it otherwise might have. Nevertheless, this combination of events drove the GBP/EUR exchange rate to a weekly high of 1.3756.
Decreased UK Retail Sales Discourage Hawkish Bank of England (BoE) Interest Rate Hike Speculation to see Pound (GBP) Slump Today
Sterling hawkishness seems likely to go on the wane again today after the UK Retail Sales figures for August failed to follow up on the strength of Wednesday’s employment data. Year-on-year sales in the last month grew by 3.7%, a slight decrease on the forecast 3.8% and a definite contraction on the previous year’s 4.2%. While this may not entirely dampen the optimism caused by the decreasing unemployment and a rapid pace of wage growth the Pound has been quick to enter a downtrend against rivals.
GBP/EUR Exchange Rate Forecast: Euro to be Pulled Down by Greek Election Suspense
Before the weekend there will be no other major data releases from the UK or Eurozone, leaving the GBP/EUR pairing likely to mostly continue on trend as investors lack any particular stimulus for movement. However, the common currency stands a strong chance of softening ahead of Sunday’s Greek general election, with the uncertainty of the result weighing on the prospects of the Eurozone and inspiring lingering Grexit fears. A more conclusive victory for former Prime Minister Alexis Tsipras would undoubtedly offer some support to the Euro, but as a clear majority seems all but impossible at this juncture it seems probable that the single currency will ultimately turn dovish.
Current GBP, EUR Exchange Rates
At time of writing the Pound Sterling to Euro (GBP/EUR) exchange rate remains on a downtrend at 1.3681, with the Euro to Pound Sterling (EUR/GBP) pairing making gains in the region of 0.7310.