On Monday the British Pound to Euro (GBP/EUR) exchange rate fell to a low of 1.2701 as the weight of Sterling-centric comments offset the impact of disappointing German data.
In remarks reminiscent of those made by other UK officials in recent weeks, Business Secretary Vince Cable asserted that the Pound is currently overvalued by between 10-15% and that the strength of the UK currency is having a detrimental impact on national growth.
His insinuations saw the Pound driven lower against most of its currency rivals.
The Pound was also still feeling downward pressure as a result of Bank of England (BoE) Deputy Governor Ben Broadbent’s hints that the central bank should refrain from raising borrowing costs in the immediate future.
During an interview with ITV Broadbent noted; ‘I would lean against the view I think that any rise in interest rates would cause calamity for a very large number of households. I think that’s an exaggeration of where we are at the moment [But] We’ve gone out of our way to communicate two central things about the likely path of interest rates once they do start to rise. First of all, the pace of increase would probably be more gentle than it would in the past. And secondly that the point we’re likely to get to after this period of rising interest rates, will be materially lower than in the past.’
A lack of notable British data prevented the Pound from recovering losses during Monday’s European session.
The GBP/EUR exchange rate even drifted lower in spite of some sub-par economic reports for the Eurozone.
The currency bloc’s bad run of reports started with a surprisingly sharp decline in German factory orders.
Factory orders in the Eurozone’s largest economy plunged by 5.7% on a seasonally adjusted month-on-month basis, the most notable fall since 2009. A slide of 2.5% had been forecast by Bloomberg analysts.
The result prompted this response from economist Christian Schulz; ‘Geopolitical risks, especially the crisis in Eastern Ukraine, have made companies cautious about their investment plans, despite very favourable fundamental and funding conditions. Once these uncertainties fade confidence and thus investment should rebound.’
This less-than-encouraging report was followed by Markit Eurozone and German Retail PMI. Both gauges fell further into contraction territory in September, sliding to 44.8 and 47.1 respectively.
To round off the dovish data set, the Sentix investor Confidence measure fell by more than anticipated.
The Euro fluctuated against several of its rivals but managed to hold its own against the Pound.
British Pound to Euro Exchange Rate Forecast
In the hours ahead the GBP/EUR exchange rate could fluctuate in response to a number of British reports, including the UK’s Manufacturing and Industrial Production figures.
Positive prints could help the Pound recover recent losses.
Industrial Production is expected to stagnate on the month in August but be up 2.6% on the year. A month-on-month Manufacturing Production increase of 0.1% is expected, with a 3.4% annual advance.
