Pound to Euro Exchange Rate Softens
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Wednesday’s session has thus far reached highs of 1.2634 whilst falling to lows of 1.2582.
The UK saw disappointment in the form of Industrial and Manufacturing Production figures, which failed to meet economists’ forecasts.
June’s Industrial Production year-on-year statistic only reached 1.2%, despite forecasts of 1.5%. Furthermore Manufacturing Production also failed to meet expectations coming in at 1.9%, unable to reach the predicted 2.1%.
The Pound is eagerly anticipating Thursday’s Bank of England (BoE) interest rate decision, which may show some popularity for Sterling in the currency market.
The UK economy has needed a wealth of positive data to suggest interest rate hikes may be on the horizon; however, UK figures have been less appealing of late.
Scotiabank economist Alan Clarke commented: ‘The last couple of months do hint at some cooling off in the near-term momentum. Euro-zone demand for our exports is still sluggish so it is hard to get too upbeat from here.’
However the prospect of interest rate hikes remains under intense speculation as some believe that a percentage of board members could break away from the unanimous vote and be in favour of hikes.
Economist Howard Archer stated: ‘It is a very close call as to whether the Bank of England will raise interest rates at the end of this year or hold off until early 2015.’
However with figures such as today’s reaching publication, it would enable the BoE to remain dovish for longer.
The Eurozone conversely is shrouded in negativity as Italian Gross Domestic Product (GDP) figures shrank again in the second quarter indicating a recession. Italian GDP reached -0.3%, instead of the forecast 0.1%.
Italian Prime Minister Matteo Renzi is facing mounting pressure to rectify one of the Eurozone’s most prominent countries.
Expert in the field Wolfgang Piccoli stated: ‘Under present conditions, and assuming a more realistic growth rate of 0.3%, the cabinet will need to find at least 15 billion Euros to 16 billion Euros to keep its deficit reduction plans on course.’
In other data the Eurozone Retail Purchasing Managers Index fell below the 50 threshold at 47.6 in July, indicating contraction.
Thursday will also see the results of the latest European Central Bank (ECB) interest rate decision, which is presently expected to remain the same at 0.15%.
The GBP to EUR pairing will face fluctuation in the currency market with such an influential week taking place for both currencies. However, the Euro looks set to remain sluggish presently trading against the Pound at 0.7933.