Pound Sterling to Euro (GBP/EUR) Exchange Rate Bullish; Hinging on Thursday’s Data
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The Pound fell slightly on Wednesday following the Bank of England’s (BoE) Meeting Minutes, whilst the Euro is fragile in an unsteady Eurozone recovery.
Thursday will see the release of French and German Composite, Manufacturing and Services PMI, which are all currently forecast to fall in July.
The Eurozone recovery is seemingly delicate, and further at risk amid the latest geopolitical tensions regarding Ukraine and Russia, after the downing of the Malaysian Airlines flight last week.
The Eurozone were discussing further sanctions on Wednesday against Russia, but what extent will be reached is uncertain.
The BBC stated: ‘The EU is preparing further sanctions against Russia for backing Ukraine’s separatists, who are accused by the West of shooting down a Malaysian Airlines passenger plane. The West has so far refrained from “sectoral sanctions” also known as Level Three Sanctions, that would target entire sectors of Russia’s economy.’
Amid all these factors, the Eurozone needs favourable data to suggest the recovery is stable.
The Euro has also dropped against the US Dollar this week, falling to an eight month low; trading in the region of 1.3457.
An expert in the field, Kathy Lien, commented: ‘The only explanation for the sell-off in EUR/USD is a technical one. The currency pair has been in a downtrend and hovering near 1.35 for the past few days with speculators itching to test this key support level. Expectations for a weaker PMI and IFO report may have also contributed to the move but these reports are not expected until Thursday.’
Alternatively the UK released the Bank of England’s Meeting Minutes on Wednesday, which caused a slight fall for the Pound. The Pound was trading between the 1.7020 and 1.7095 US cents boundaries on Wednesday, after a unanimous vote was cast again by the Monetary Policy Committee board that were unable to justify entertaining current interest rate hikes.
The minutes stated: ‘A rise in bank rate at a time when the economy was growing strongly would facilitate a more gradual path thereafter and would allow the committee to evaluate the sensitivity of households, firms and financial markets to changed in interest rates, following a long period during which bank rate had remained unchanged.’
For now the Pound looks to remain bullish in the GBP to EUR exchange rate, however data released Thursday morning could prove fruitful for both economies.