Negative Reaction to Lower Eurozone Trade Balance Causes EUR/GBP Exchange Rate Losses
A larger-than-expected reduction in the Eurozone trade balance has weakened the single currency today, leading to Euro to Pound (EUR/GBP) exchange rate losses.
The Euro has fallen to a level of £0.8912 against the Pound, which is near the lowest level of trading since early August.
The latest Eurozone data has disappointed traders – July’s trade balance reading has declined from €22.5bn to €17.6bn – this is more than the expected €18bn printing.
This result still leaves the Eurozone with a sizable trading surplus, but the size of the decline has nonetheless lowered confidence among Euro traders.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Static as No-Deal Brexit Plans Scrutinised
The Pound (GBP) has risen slightly against the Euro (EUR) today, mainly because the latter currency has been weakened by the recent trade balance data.
This has pushed the GBP/EUR exchange rate up to €1.1218, which is below the week’s best exchange rate of €1.1247.
With no direct economic data to refer to today, GBP traders have instead been poring over yesterday’s no-deal Brexit papers.
More of the government’s plans for a no-deal Brexit have been released – these detail how the UK could be affected if the UK leaves the EU without a deal.
Among the forecasts was a prediction that it could be harder for UK drivers to travel in EU countries and that mobile roaming charges could return.
Other potential areas of disruption include international shipping, which might be slowed down by new checks and docking requests outside of the EU.
Euro to Pound Exchange Rate Forecast: Will Slower Eurozone Inflation Trigger EUR/GBP Decline?
The Euro (EUR) is at risk of declining against the Pound (GBP) in the week ahead, in the event that Monday’s inflation rate readings show a slower pace of price growth.
The finalised figures for August are expected to show a yearly slowdown for the base and core readings; the latter excludes volatile fuel and food prices.
Slower Eurozone inflation will reduce the odds of an early 2019 interest rate hike from the European Central Bank (ECB) and could cause EUR/GBP losses.
Along the same lines, the first major UK data out next week will also be inflation rate figures; the UK stats are due out on Wednesday.
Unlike in the Eurozone, faster inflation is predicted during August, for the base and core readings, on the month and the year.
GBP traders are looking for more signs that the Bank of England could commit to higher interest rates in 2019 and higher inflation would pressure officials to act.
When inflation picks up, raising interest rates can be a way of reducing rampant price growth because it encourages saving instead of spending.