Euro GBP Exchange Rate Soft: ECB Quantitative Easing Stimulus Likely
The Euro to GBP exchange rate is currently trending in the region of 0.8006, fluctuating between a low of 0.7994 and a high of 0.8011. Movement at this time is around -0.19% which is likely to be connected to the recent revision to the second quarter Gross domestic Product (GDP).
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Last week began ominously for the Euro as the ZEW economic sentiment surveys for the Eurozone and Germany showed an unexpected dip in confidence. The problematic start was compounded following negative domestic data, pertaining to Eurozone industrial production, which saw a flat line figure despite having been forecast to hit 0.2%.
Thursday saw a struggling Euro kicked whilst it crawled. German, French and Eurozone Gross Domestic Product results all fell below forecast levels. The result was to see the Euro decline against nearly all of its major peers with the exception of Sterling.
Sterling’s week, unbelievably, was worse than the Euro. It began in a relatively stable position having had no important domestic data releases to provoke movement. Wednesday, however, was a complete disaster with UK domestic data under par and a dovish Bank of England (BoE) inflation report. Whilst unemployment was seen to drop fractionally from the previous figure, average weekly earnings plummeted from 0.4% to -0.2%. The miscorrelation between unemployment and average wage saw an immediate drop in investor confidence towards the Pound.
To add fuel to an increasingly volatile blaze, the release of the BoE inflation report was dovish; policymakers chose to continue with current monetary policy as opposed to diversification. The report also quelled the mounting speculation of an interest rate hike in the near future due to a shift in focus from unemployment to average wage.
Today there is very little by way of domestic data for the Euro. It continues to show losses against most of its major peers as a result of the hangover from last week’s Eurozone GDP retraction.
There are several hazards concerning the Eurozone which are likely to spark stimulus measures from the European Central Bank (ECB). The most significant of those hazards are threefold; youth unemployment, lower consumer price inflation and the threat of an oil cut from Russian sanctions on the West. These mounting issues of varied complexity are likely to prompt an ECB stimulus package. Should a quantitative easing rhetoric gather momentum then demand for the Euro will dampen as a result.
Movement for Sterling has been positive today following the horrible week preceding. A revision to Friday’s second quarter UK Gross Domestic Product result, by the Office for National Statistics (ONS), has seen a 0.2% growth to the UK economy. There are no UK domestic data releases to trigger movement today.
The Euro to Pound Sterling exchange rate has hit a low today of 0.7994.
EUR/GBP Exchange Rate Forecast
There s very little, in terms of domestic data, to predict movement for the Euro. Therefore movement in the early part of the week is most likely to be governed by geopolitical issues and the performance of other currencies.
Thursday will be pivotal for the Euro with the domestic data releases of German composite, manufacturing and services PMI’s, as well as Eurozone composite, manufacturing and services PMI’s.
There are several UK domestic data releases over the coming week which should intensify movement for the Euro to Pound. Tuesday’s consumer price and retail price indexes are of significant importance.
Ordinarily Wednesday’s release of the Bank of England’s minutes from the inflation report would be of high importance, but the dovish and unchanged nature of the report means that the likelihood of the minutes sparking movement is diminished.
Thursday’s UK retail sales report will also be of interest to those invested in Sterling.
The Euro to Pound Sterling exchange rate has seen a high today of 0.8011.