GBP/EUR Exchange Rate Trends Lower after UK Retail Sales show Pedestrian Annual Growth
If you're looking to make an international money transfer, we recommend TorFX.
The Pound to Euro exchange rate is currently trending in the region of 1.2503.
Yesterday the Pound to Euro exchange rate filed significant gains following the publication of the minutes from the most recent Bank of England (BoE) monetary policy meeting.
Speculation was rife that one of the committee members would dissent and opt for an interest rate hike in the near future. Those backing Sterling were pleasantly surprised, however, to discover that two of the nine policymakers had voted against the continuation of the current record low interest rate.
Martin Weale and Ian McCafferty, the dissenting duo, argued that ‘economic circumstances were sufficient to justify an immediate rise in Bank Rate. The continuing rapid fall in unemployment alongside survey evidence of tightening in the labour market created a prospect that wage growth would pick up’. The pair was outnumbered, however, because the other policy makers believe there is ‘insufficient evidence of inflationary pressures’ to justify an immediate rate hike.
Despite the fact that the hawkish policymakers were outnumbered and outvoted; trader reaction saw a positive boost for Sterling. This is most likely to be due to the fact that the policymakers have been united on their outlook on interest rate rises before now. The shift from a unanimous committee strengthens speculation for a rate hike before the end of the year. However, Sterling volatility over the next week or so is highly likely as Bank of England Governor Mark Carney is prone to changing his mind, which could well amplify the confusion surrounding interest rates.
Wednesday was less favourable from a European perspective. German producer prices retracted by -0.1% in July, and fell by -0.8% annually. Also the seasonally adjusted Eurozone Construction Output declined by -0.7% in June, tumbling by -2.3% on a year-on-year basis.
The Pound Sterling to Euro exchange rate has hit a low today of 1.2484.
Today has seen a reversal in fortune for both Sterling and the Euro.
UK Retail Sales data has left a lot to be desired. Whilst July’s retail sales showed growth beyond expectation, the yearly figure showed sales growth had slowed to 3.4% having been forecast to hit 3.5%.
So far the damage caused by these less-than-ideal domestic data results has been minimal. This is most likely to be as a result of the positive hangover from yesterday’s hawkish Bank of England minutes.
The Euro has had a mixed bag in terms of domestic data results.
The Eurozone Composite PMI fell from 53.8 to 52.8, Manufacturing PMI declined to 50.8 from 51.8 and Services PMI dropped to 52.8 from 54.2.
However positive German domestic data has overshadowed the negative Eurozone results causing the Euro to gain a little versus many of its major peers. The German Composite PMI hit 54.9 having only been forecast to reach 54.6. The German Manufacturing PMI also posted positively having exceeded expectations. Similarly the German Services PMI rose higher than forecast figures hitting 56.4.
Forecast for the Pound to Euro Exchange Rate
With the bullish US Dollar continuing on its surging path; market volatility is a high likelihood. Any economy which has a poor domestic data result is likely to extend losses beyond the norm as ‘Greenback’ (USD) demand heightens.
There is nothing by way of UK domestic data tomorrow so expect movement to be dictated by foreign currency changes. The latest Eurozone failure is likely to keep Sterling trending downwards for the remainder of the week.
Tomorrow will be significant from a European economic perspective. European Central Bank President Mario Draghi is due to speak at the annual symposium in Jackson Hole, Wyoming. The symposium should give valuable insight in to the timing of the next European interest rate hike.
The Pound Sterling to Euro exchange rate has hit a high today of 1.2518.