Pound to Euro (GBP/EUR) Still Bearish: European Domestic Data Disappoints
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The Pound will see a quiet day by way of data releases on Thursday; however, Friday will see highly significant UK Gross Domestic Product figures reach publication, which could alter the Pound to Euro exchange rate.
The Bank of England (BoE) released their Inflation Report yesterday which caused a severe drop for the Pound’s value in the currency market. The aftermath of the Bank of England’s statements saw Sterling plummet against 16 other majors; disappointment ensued as Governor for the Bank of England, Mark Carney, became dovish in his remarks in comparison to his previously hawkish stance.
The BoE maintained their unanimous vote to keep interest rates at 0.50% in the UK whilst also cutting wage forecasts for the UK job market.
Expert in the field Neil Jones stated: ‘The market is busy pushing back its interest-rate hike expectations well into 2015. That is the key why the Pound is being sold across the board. There was some expectation and pre-announcement bullishness, however, given the downward revision in wage projections and the “gradual and limited” words again, the market is selling the Pound.’
Wednesday saw UK Average Weekly Earnings reach a surprising -0.2%, despite economists only forecasting a -0.1% statistic. However, on a more positive note, the UK unemployment figure fell to 6.4% from the former 6.5%, with some economists believing that a drop as low as 6.0% could occur by the end of 2014.
The Bank of England stated: ‘Uncertainty about how much slack there is has increased in recent months, in part reflecting labour market outturns.’
Conversely the Euro saw disappointing figures on Wednesday by way of Eurozone Industrial Production which flopped at 0.0% in June, disappointing forecasts of 0.2%.
Thursday however will see the publication of French, German and Eurozone Gross Domestic Product (GDP) figures, which are all forecast to fall in the second quarter in comparison to the first. Furthermore the Eurozone Consumer Price Index and the European Central Bank’s (ECB) Monthly Report are also scheduled for release on Thursday.
However, Wednesday saw scepticism in the Eurozone recovery with a Reuters poll indicating the ECB will have to introduce quantitative easing in 2015.
Economist Jennifer McKeown commented: ‘Recent signs the Eurozone recovery is faltering have further intensified deflation risks, implying that bolder monetary policy is warranted.’
For now the Pound to Euro exchange rate will remain volatile to fluctuations following data releases in the latter half of this week. The Pound has softened greatly in the currency market and is likely to remain bearish against other majors. However, the Eurozone is due to publish figures today that could fall lower than forecast and could cause the Euro to drop.
Matthew Olney at Future Currency Forecast speculates: ‘The end of the week will see the publication of the latest UK GDP data, which could allow the Pound to recover some space if it comes in positively.’
Pound to Euro Update
Yesterday’s disappointing day for Sterling is still having a massive impact. With a distinct lack of UK domestic data there has been very little by way of damage limitation. The only data to have been released today was RICS House Price Balance, which has very little influence over Sterling movement.
In contrast; today’s European domestic data docket has been heavy, but it doesn’t make good reading for those invested in the Euro. German Gross Domestic Product (GDP) posted a significant loss of -0.2% from 0.7%. Eurozone GDP also posted a decline from 0.2% to 0.0%. And to top it off French GDP showed contraction from 0.8% to 0.1%.