Pound Sterling Euro (GBP/EUR) Exchange Rate Slumps as UK Mortgage Approvals Hit Six-Year Low
As UK mortgage approvals fell to their lowest level in nearly six years the Pound Sterling to Euro (GBP/EUR) exchange rate came under renewed pressure.
Investors were caught off guard by this decline, with forecasts having pointed towards a modest uptick in mortgage approvals on the month.
This weaker showing suggests that household confidence remains softer than markets would like, exposing Pound Sterling (GBP) to a fresh bout of selling pressure.
Brexit-based uncertainty also continued to weigh on the Pound today, with markets still frustrated by the lack of clarity over the UK’s likely future relationship with the EU.
While the prospect of a third meaningful vote on Theresa May’s already rejected Brexit deal diminished this gave GBP exchange rates little cause for positivity.
Deteriorating German Consumer Sentiment Dents Euro (EUR) Exchange Rates
However, the Euro (EUR) struggled to capitalise on the Pound’s softness this morning thanks to a disappointing German GfK consumer confidence index.
Rather than holding steady on the month the index eased from 10.7 to 10.4 in April, highlighting the increasingly fragile nature of consumer confidence.
With investors already concerned by signs of a slowdown within the Eurozone’s powerhouse economy this deterioration naturally limited the appeal of the single currency.
Coupled with increasing market worries over the prospect of a US recession, and the continued slowing of global trade, the index left EUR exchange rates on a generally weaker footing.
Fresh Euro (EUR) Weakness Forecast on ECB Commentary
Comments from European Central Bank (ECB) policymakers are likely to keep the Euro on a weaker footing in the near future.
As the central bank has already shifted towards a dovish policy outlook, effectively ruling out the prospect of a 2019 interest rate hike, EUR exchange rates look set to remain under pressure.
Fresh signs of policymaker caution over the Eurozone economic outlook could offer the GBP/EUR exchange rate a potential rallying point, especially if the ECB appears open to monetary loosening.
Even so, the Euro may find support on Thursday if March’s German consumer price index shows that inflationary pressure is still picking up.
While anything short of a significant acceleration in inflation is unlikely to be enough to bolster the ECB’s confidence this could still give the single currency a lift.
GBP/EUR Exchange Rate Remains Vulnerable to Brexit Uncertainty
Brexit developments are likely to keep the Pound on a weaker footing for the foreseeable future, meanwhile.
Unless the odds of a no-deal Brexit scenario fall significantly support for GBP exchange rates could easily remain limited.
Until investors see some sense of clarity and political jitters subside the mood towards the Pound is unlikely to see any material improvement.
However, tomorrow’s CBI reported retail sales index could offer the GBP/EUR exchange rate a boost if sales show a sharp uptick on the month as forecast.
If the UK economy can demonstrate greater signs of resilience the downside bias of Pound Sterling could ease, at least in the short term.