The Euro Pound (EUR GBP) exchange rate slipped from a ten-month high today as markets reacted poorly to the minutes from the ECB’s latest Policy meeting.
Euro (EUR) ECB Minutes Disappoint Markets
Euro slumped today as minutes from the the European Central Bank’s (ECB) July policy meeting revealed that members are beginning to express concerns that the strength of the single currency may be hampering the bank’s efforts to increase inflation.
In its latest minutes the ECB said;
‘Concerns were expressed about a possible overshooting in the repricing by … markets, notably the foreign exchange markets, in the future.’
The remarks caused Euro sentiment to plummet as investors took this as another sign that the bank may be planning to leave its extremely accommodating monetary policy in place for an extended period of time.
However despite this a number of analysts suggest that a possible discussion on the tapering of its quantitative easing programme.
Pound (GBP) Strengthened as Retail Sales Beat Expectations
The Pound was able to claw its way higher this morning as the UK released its latest retail sales figures.
According to data released by the ONS sales growth remained flat at 0.3% in July, outpacing predictions that a decline in consumer spending would prompt sales growth to slow to 0.2%.
Ruth Gregory, UK economist at Capital Economics said;
‘July’s retail sales figures were fairly encouraging given the recent intensification of the squeeze on consumers’ real incomes and suggest that talk of a sharp consumer slowdown has been overdone.’
However the sales figures weren’t all sunshine and rainbows as the ONS also revised down June’s figures from 0.6% to 0.3%, with such a drastic revision likely to have impacted the UK’s second quarter growth prospects.
EUR GBP Forecast: Eurozone Growth to Sustain?
Looking more long-term the EUR GBP exchange rate markets are likely to become increasingly focused on the economic growth in the Eurozone.
After set a blistering pace in the first half of the year some recent data has suggested that economic activity in the bloc may have begun to slow recently and investors will be keen to gleam over upcoming economic figures for some sort of confirmation of this.
Meanwhile Brexit uncertainty is likely to continue to hang over Sterling this year as analysts fear that the frosty reception seen in early talks may have set the tone for future negotiations.
Current Interbank Exchange Rates
At the time of writing the EUR GBP exchange rate was trending around 0.9077 and the GBP EUR exchange rate was trending around 1.1015.
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