Yet more disappointing data from the currency bloc’s largest economy has seen the Euro slump to a fresh 2-year low against the Pound. An upward revision to British second quarter Gross Domestic Product has overshadowed a not-so-positive Consumer Confidence print.
The Pound Sterling to Euro exchange rate is currently trending in the region of 1.2849.
Less-than-ideal British data on Monday halted the Sterling gains which were initiated by a hawkish Bank of England Governor Mark Carney last week. In a speech given in Wales he suggested that the majority of the prerequisites for normalising monetary policy have now been met.
Monday’s BoE Consumer Credit declined from £1.108 billion to 0.898 billion. Mortgage Lending fell from £2.34 billion to £2.28 billion and Mortgage Approvals dropped from 66, 100 to 64, 210 despite having been forecast to rise to 69, 000.
European data on Monday was relatively positive and the Euro gained a healthy boost from German inflation data. The German Consumer Price Index (EU Harmonised) eclipsed the median market forecast of a drop from 0.8% to 0.7%, with the actual result equalling the previous figure.
The Pound Sterling to Euro exchange rate has hit a low today of 1.2788.
Tuesday’s British data has been reasonably mixed but not enough to halt Sterling gains against many of its most traded currency competitors. The GfK Consumer Confidence Survey was forecast to drop from 1 to 0, but the actual data showed a contraction of -1. Confidence may be in a ‘new period of stasis,’ said Nick Moon, managing director of social research at GfK. One explanation ‘is that many people are not themselves feeling any better off despite the growth in GDP’.
Sterling gains on Tuesday are as a result of a revision to the second-quarter Gross Domestic Product. Quarter-on-quarter GDP previously printed at 0.8% but an upward revision to 0.9% has seen the Pound gain against many of its rivals. ‘Taken on its own this could suggest that the U.K. may need to raise rates earlier and more aggressively,’ said James Knightley, an economist at ING Group in London. ‘But in the absence of inflation and wage pressures and with signs that the housing market is cooling we doubt that the Bank of England will move imminently’.
European data has been particularly poor on Tuesday which has seen the Euro slump against all of its major traded currency competitors. German Retail Sales cooled in August having declined from 1.0% to 0.1%. The German seasonally adjusted Unemployment Rate managed to stay in line with the previous figure of 6.7%, but the Unemployment Change revealed 12,000 newly unemployed despite having been forecast to contract by -2,000.
Eurozone inflation data was also particularly negative on Tuesday. The Eurozone Core Consumer Price Index declined from 0.9% to 0.7%.
Forecast for the Pound to Euro Exchange Rate
With a lack of influential, market moving European data on Wednesday the Euro is likely to continue to trend lower against the majority of its rivals.
A singular British economic publication on Wednesday is likely to dictate which direction Sterling will trend in. The seasonally adjusted Manufacturing PMI is forecast to rise a little from 52.5 to 52.7.
The Pound Sterling to Euro exchange rate has reached a high today of 1.2873.
UPDATE
On Friday the Pound to Euro (GBP/EUR) exchange rate extended recent declines as investors responded to the news that growth in the UK services sector cooled in September. While Markit’s Services PMI had been expected to slip a little, the declination was steeper than anticipated.
Meanwhile, the Euro was supported against its British rival by a significantly better-than-forecast retail sales report for the region.
The 1.2% month-on-month sales growth completely steamrollered expectations for a sales increase of 0.1%.
The GBP/EUR exchange rate is likely to hold today’s declines into the weekend but could fluctuate following the publication of the US Non-Farm Payrolls report.
