MPC Policymakers Remain Dovish, McCafferty Remains Hawkish
Ian McCafferty retains his position as the only hawkish member of the Monetary Policy Committee (MPC) by voting against eight other policymakers. While the MPC left interest rates level at 0.50%, McCafferty once again expressed a desire to increase the rate by 0.25%, citing a belief that domestic costs would see inflation exceeding the target quicker than the Committee’s dovish predictions in November anticipated.
Euro (EUR) Bullish as German 2015 GDP Meets Forecasts
German Gross Domestic Product rose from 1.6% to 1.7% in 2015 as forecast. The news has seen the GBP/EUR exchange rate slump, already weakened by anticipation ahead of the Bank of England’s (BoE) meeting later today. The BoE will decide upon interest rates and the asset purchase target.
Eurozone Production Figures Disappoint Although Euro (EUR) Edges Positive
Eurozone Industrial Production figures for November have disappointed, falling from 2.0% year-on-year (YoY) to 1.1%. The final figure is -0.2% below forecast, with month-on-month (MoM) Industrial Production dropping from 0.8% to -0.7% when a drop to -0.3% was predicted. Warm weather in particular has been blamed for the slowdown after causing a drop in demand for energy. Up-to-date surveys have suggested that the Eurozone experienced a positive end to the year, allaying fears of an economic slowdown towards the end of 2015.
Despite the news, the Euro has managed to remain in positive territory against Pound Sterling.
After plunging deep into negative territory yesterday, Pound Sterling has been able to regain some ground thanks to market correction and trader appetite for a weakened British asset. The Euro is trading mostly negative today on the catastrophising of Société Générale, a French-owned multi-national banking group.
NIESR Forecast Steady UK Growth: GBP/EUR Exchange Rate Trending Up
Yesterday’s poor figures regarding retail, industry and manufacturing sparked a considerable Pound sell-off as investors reassessed the likelihood of a strong economic performance from the UK economy in Q4 2015. Retail Sales barely registered any growth at all over what should have been a lucrative Christmas period, while industrial production dropped unexpectedly and manufacturing output declined at an accelerated pace.
Pound Sterling dived across the board yesterday following the news and the GBP/EUR exchange rate came within a few pips of the one-year low experienced on Monday 11th. Traders have been enticed to buy by a low value Pound, pushing the exchange rate higher, while figures from the National Institute of Economic and Social Research (NIESR) suggest that concern over economic performance was premature.
The think-tank has reaffirmed its belief that the UK economy will have grown by 0.6% in the final quarter of 2015, up from the nearly-three year low experienced in the previous period. If correct, the prediction means that the UK registered overall growth of 2.2%, down from 2.9% the previous year.
The GBP/EUR exchange rate is currently trading around 1.3360.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Trending Down as Société Générale Issue Eurozone ‘Doomsday’ Warning
A strategist at Société Générale bank has echoed statements made yesterday by analysts at the Royal Bank of Scotland (RBS), claiming that another global financial crisis is immanent. RBS yesterday warned clients to ‘sell everything except high quality bonds’, emphasising that the focus should be on recovering capital, not creating it. The forecast included predictions of a drop in London stocks of up to -30% and a fall in oil to $16 per barrel.
Société Générale’s Albert Edwards has added to the gloom, suggesting at a conference in London that another crisis would trigger a Eurozone collapse. Calling the Eurozone a ‘doomsday machine in favour of the German economy,’ Edwards predicts that the European Central Bank (ECB) will be powerless against another economic downturn.
According to Société Générale’s Albert Edwards, ‘Developments in the global economy will push the US back into recession. The financial crisis will reawaken. It will be every bit as bad as in 2008-09 and it will turn very ugly indeed. Can it get any worse? Of course it can.’
The EUR/GBP exchange rate is currently trading between 0.7468 and 0.7515.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Will Eurozone Production Data Leave UK Economy Red-Faced?
Industrial Production data is due for the Eurozone later during the European session and is predicted to show a year-on-year (YoY) growth of 1.3%, down from 1.9% previously. There is also Greek inflation data, which will give a stronger indication of the health of one of the most concerning areas of the Eurozone.
The GBP/EUR exchange rate is currently trending between 1.3298 and 1.3387.