A lack of notable economic news for Britain and the Eurozone limited movement in the Euro to GBP pairing over the past week.
However, the Pound did ease away from recent highs against its European rival as expectations eased regarding the Bank of England introducing an interest rate increase before the spring of next year.
Bets that the positive UK data seen in recent weeks would bring about a rate hike sooner-rather-than-later saw Sterling broadly strengthen, but some industry experts viewed the currency’s rally as overdone.
This, in conjunction with a surprising decline in UK mortgage approvals and a slowing in domestic retail sales, pushed the Pound lower against peers like the Euro.
The Euro, meanwhile, experienced modest fluctuations as a result of a mixed bag of domestic data.
While one report showed that the level of business confidence in the Eurozone climbed, others revealed declines in German retail sales and Italian inflation.
The appeal of the Euro was also limited by the expectation that the European Central Bank will introduce additional stimulus when it gathers next week.
In the opinion of Senior Foreign Exchange Trader John Cameron; ‘Thursday’s European Central Bank policy announcement is the main event for the week ahead as far as euro-watchers are concerned.’
Cameron forecast; ‘ECB President Mario Draghi has confirmed that his board actively discussed a Eurozone version of Quantitative Easing at their previous two meetings; any confirmation that QE is set to begin will likely bring a euro sell-off, but more stalling from Draghi may have the opposite effect, sending GBP EUR down from the 16 ½ month high which it struck a week ago.’
While the central bank meetings will be the main market movers next week, several other data releases may spark volatility in the GBP to Euro exchange rate.
UK construction/services PMI, Eurozone GDP, UK trade balance and Eurozone retail sales figures will all be of particular interest.
If the BoE leaves stimulus unaltered (as expected) it will take an unexpectedly upbeat UK data release to give the Pound a notable boost.
Friday will also see the publication of the highly influential US non-farm payrolls report. The world’s largest economy is expected to have added 217,000 positions in May, taking the US unemployment rate to 6.4 per cent from 6.3 per cent.
Euro to Pound Update – 02/06/14
Ahead of this week’s influential central bank announcements, the Euro was trending slightly lower against the Pound.
The common currency weakened against its British rival following the publication of revised manufacturing data for the Eurozone.
Markit’s manufacturing gauge for the currency bloc was shown to have come in at 52.2 in May.
Over the course of last month a higher flash estimate of 52.5 had been released.
The measure has fallen from 53.4 in April as a result of contraction in France and slowing growth in Germany, Greece, Austria and Italy.
The report detailed a slowing in output growth and prompted this response from economist Chris Williamson; ‘The May drop in the manufacturing PMI will inevitably add to the clamour for policymakers to provide a renewed, substantial boost to the region’s economy and ward off the threat of deflation’.
The Euro posted modest losses after the report was published and continued trading close to a three-month low against the US Dollar.
Sterling was also slightly stronger as a result of domestic manufacturing figures. Although the UK’s manufacturing gauge did ease lower in May it remained well above the 50 mark separating growth from contraction.
Today’s German inflation data could have a considerable impact on the Euro later today.
The report is expected to show that Germany’s consumer price index climbed by 0.1 per cent in May month-on-month following a decline of 0.2 per cent in April.
A surprise result could send the Euro into a tailspin ahead of Thursday’s European Central Bank rate decision.
Tomorrow’s UK construction PMI and Eurozone inflation figures are also bound to impact the Euro to Pound exchange rate.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8127,
Euro,,US Dollar,1.3600,
Euro,,Canadian Dollar,1.4763,
Euro,,Australian Dollar,1.4695,
Euro,,New Zealand Dollar,1.6091,
US Dollar,,Euro ,0.7355,
Pound Sterling,,Euro,1.2307,
Canadian Dollar,,Euro,0.6773,
Australian Dollar,,Euro,0.6804,
New Zealand Dollar,,Euro,0.6214,
[/table]
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