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Despite Soft European Data the Pound Sterling to Euro (GBP/EUR) Exchange Rate Dived following Dovish BoE

Pound euro exchange rate


After Bank of England (BoE) policymakers voted 8-1 in favour of holding the cash rate the Pound dived across the board. Aiding the depreciation was news that the central bank lowered growth forecasts for 2015 and 2016, and stated that inflation is expected to remain well below target throughout 2016. The Pound Sterling to Euro (GBP/EUR) exchange rate plunged by around -0.8% in the immediate aftermath of the decision.

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.4054.


Pound Sterling to Euro (GBP/EUR) Conversion Rate Forecast to Trend Statically ahead of BoE ‘Super Thursday’

The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a limited range on Thursday morning.

Today is known as ‘Super Thursday’ because not only will we see the Bank of England (BoE) interest rate decision, but also the immediate release of the meeting minutes in conjunction with the publication of the quarterly Inflation Report. With so much significant market-moving data to come, the currency market has seen comparatively quiet trade thus far.

Whilst the British central bank is not expected to move on the benchmark interest rate at this time, the accompanying minutes and Inflation Report ought to provoke significant Sterling volatility. Should the minutes show that one or more policymakers joined the hawkish Ian McCafferty in voting for an immediate rate increase the Pound is likely to rally. In addition, the quarterly inflation report will be hugely significant given that the lack of price pressures has been the main concern for policymakers wishing to hold accommodative policy. Should the report suggest that the central bank expects inflation to pickup sooner-than-anticipated the Pound will advance in response.

‘We suspect at least one other MPC member joined Ian McCafferty,’ said James Knightley, an economist at ING Bank NV in London. ‘With Mark Carney continuing to suggest that the decision whether to raise rates or not will come into ‘sharper relief’ for him around the turn of the year, we favour May as the start point for rate rises — after the Federal Reserve, but well ahead of current market expectations.’

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.4147.

Euro to Pound Sterling (EUR/GBP) Exchange Rate Holds Steady despite Weak European Data

With traders focus dominated by the forthcoming ecostats released by the BoE, the shared currency was trending narrowly versus its major peers despite several disappointing domestic data results. September’s German Factory Orders unexpectedly contracted on a non-seasonally adjusted basis by -1.0% on the year, with September’s monthly score diving by -1.7%. October’s German Construction PMI dropped from 52.4 to 51.8. October’s Eurozone Retail PMI fell from 51.9 to 51.3, whilst the German Retail PMI dropped from 54 to 52.4. Adding to the veritable smorgasbord of poor European data releases, September’s Eurozone Retail Sales missed estimated growth on the year after monthly sales unexpectedly contracted.

With the Volkswagen scandal taking centre-stage following news that some petrol-powered vehicles used the cheat device as well, the poor result from German Factory Orders suggests that the industry should prepare for yet more deterioration. ‘The fact that new orders have dropped for three consecutive months suggests that our positive take on the German industry got some scratches,’ said Carsten Brzeski, chief economist at ING-Diba AG in Frankfurt. ‘At the moment, strong domestic demand should more than offset the weakening of industrial activity but today’s data suggest that the industry should be prepared for stormier weather.’

The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.4116 during Thursday’s European session.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: BoE Outcome to Determine Sterling Movement

With so much resting on Bank of England ecostats released today, future Sterling movement will be determined by the outcome. Therefore, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to continue trending within a limited range ahead of the noon decision. With European data producing a number of disappointing results, however, the shared currency is unlikely to rack up any huge gains even if BoE policy outlook is decidedly more dovish than the market anticipates.

Although Friday’s GBP/EUR exchange rate will most likely see directional movement in response to today’s BoE data, there are a number of domestic data publications with the potential to provoke changes. British Industrial Production, Manufacturing Production and Trade Balance data may cause Sterling volatility. German Industrial Production has the potential to cause changes for the common currency. With that being said, there is the potential that Friday will see subdued trade during the London session as trader focus will be dominated by the US Change in Non-Farm Payrolls report.

The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.4201 during Thursday’s European session.