GBP/EUR Exchange Rate Muted on Mixed Eurozone Data
Update: The Pound Sterling Euro (GBP/EUR) exchange rate is trading in a narrow range today, following on from the release of some mixed Eurozone data this morning.
The Euro’s initial gains against the Pound were trimmed this morning when the Eurozone’s latest GDP figures revealed growth in the bloc had slowed to 0.3% in the second quarter, but was prevented from facing its own losses as inflation and employment came in better than expected.
It looks like we’re running out of excuses to explain these weaker Eurozone growth numbers says ING’s @BertColijnhttps://t.co/PpCfgdHXfO
— ING Economics (@ING_Economics) July 31, 2018
At the same time Sterling remains in a holding position today as markets continue to await the Bank of England’s (BoE) rate decision later in the week.
GBP/EUR Exchange Rate Slides on Robust German Inflation Figures
UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate is edging lower this afternoon, with the Euro finding support from a solid CPI reading from Germany.
Destatis reported this afternoon that German price growth held above 2% for a third consecutive month in July, with the result being welcomed by EUR investors.
German July Inflation at 2.1% yoy. July is the third month with inflation above ECB Target in Germany: July last year it was 1.5%
— Paolo the Sailor (@PaoloTheSailor) July 30, 2018
However helping to stem the losses in the GBP/EUR exchange rate is the reluctance of investors to alter their positions in Sterling, ahead of the BoE rate decision on Thursday.
GBP/EUR Exchange Rates Bolstered as ECB Leaves Rates on Hold
The Pound Sterling Euro (GBP/EUR) exchange rate found its initial gains last week in the wake of the Eurozone’s latest PMI figures, with a worse-than-expected slowdown in the bloc’s service sector in July, propelling the Euro (EUR) lower.
While the single currency was then offered some respite thanks to positive trade talks between US President Donald Trump and European Commission President Jean-Claude Juncker, this accounted for little in the face of the European Central Bank’s (ECB) latest policy meeting.
This saw the Euro falter as ECB President, Mario Draghi appeared to indicate that the bank’s pledge to leave interest rates on hold until next summer, meant the end of summer rather than the start.
Meanwhile the Pound’s performance was a little mixed last week, finding strength at the start of the session as Theresa May took charge of Brexit negotiations, but struggling to build on these gains later in the week as some fleeting Brexit optimism evaporated with the EU’s rejection of May’s customs plan.
Pound Euro (GBP/EUR) Exchange Rate Firms in Build-up to BoE Rate Decision
The Pound Euro (GBP/EUR) exchange rate starts this week on a fairly solid footing as markets await the Bank of England’s (BoE) rate decision on Thursday.
This strength in likely to carry throughout the first half of the week’s session, with the market consensus being that the August policy meeting will result in the BoE voting to raise interest rates by 0.25 base points.
With this being the first hike since last November and only the second hike in over a decade, the anticipation among GBP investors is almost palpable.
However, while a hike will be welcomed by markets, it may not light a fire under Sterling as some traders would hope, with analysts warning the bank is likely to proceed with a ‘dovish hike’.
This would see the hike as a one-off rather than the start of a new cycle of tightening, such as is currently being seen by the US Federal Reserve.
Euro (EUR) Exchange Rates Stable as Italy Rejects Referendum Reports
At the same time the Euro (EUR) is holding its own this morning as Deputy Prime Minister of Italy and leader of the 5-Star Movement, Luigi Di Maio, rejects any suggestions that Italy’s new coalition government could hold a referendum on Euro membership.
This came after comments from 5-Star founder Beppe Grillo last week, when he suggested that Italy should have a ‘plan B’ if the financial situation deteriorated, and that Italy could hold a referendum on the Euro.
Speaking to Corriere della Sera on Sunday, Di Maio said this was not in the governing coalition’s contract and that ‘this government will not pursue it’.
GBP/EUR Exchange Rate Forecast: Robust German Inflation to Bolster the Euro?
Looking ahead to today’s session, the Pound Euro (GBP/EUR) exchange rate may fall back later this afternoon, with the release of Germany’s latest CPI figures.
Economists are forecasting that inflation will have held at a solid 2.1% in July, potentially putting some pressure on the ECB to rethink its plans to leave rates on hold for another 12 months.
Meanwhile, disregarding the BoE’s rate decision, the Pound could also see some movement later this week following the release of the UK’s latest PMI figures, with an expected slowdown across the UK’s private sector potentially weakening Sterling exchange rates.