Euro Advances on Pound and US Dollar
On Thursday the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7829, up over 0.15% on the day’s opening levels. The Euro to US Dollar (EUR/USD) exchange rate advanced by over 0.2% as investors speculated on the outcome of today’s European Central Bank policy meeting.
German Factory Orders Fall Short
The Euro managed to maintain a stronger position against both the US Dollar and Pound in spite of a less-than-spectacular Factory Orders print from the Germany – the Eurozone’s largest economy.
It had been forecast that the level of German factory orders would increase by 2.3% in September on a seasonally adjusted month-on-month basis.
Orders actually only managed a 0.8% increase following a revised decline of 4.2% the previous month.
On the year, non-seasonally adjusted factory orders fell by -1.0%, in line with economists’ expectations.
The report saw economist Thomas Harjes comment; ‘A slump in exports to Russia and lacklustre shipments to the rest of the Euro area weighed on output. Germany’s domestic fundamentals remain sound. We expect private consumption to gradually strengthen again.’
ECB Stimulus Not Forecast
Data from Germany has had a habit of underwhelming recently. This, coupled with weakness in the Eurozone as a whole and slowing global economic growth, has led to calls for increased stimulus measures from the European Central Bank (ECB).
However, with recent reports indicating that policymakers from within the central bank are at odds with President Mario Draghi about the direction being taken, the ECB is unlikely to unveil full-scale quantitative easing measures today.
German Construction, Retail PMI Impresses
As the European session progressed the EUR/GBP and EUR/USD exchange rates held gains following the publication of largely positive economic reports for the Eurozone.
Although the French Retail PMI remained in contraction territory in October, it did advance from 41.8 to 46.0.
Meanwhile, both Germany’s Construction and Retail PMI’s showed improvement. The German construction index climbed from 50 to 51.5 last month while the nation’s Retail PMI pushed from 47.1 to 50.2 – taking it above the 50 mark separating growth from contraction. This was the first increase in the nation’s Retail PMI since July and prompted this response from economist Oliver Kolodseike; ‘October’s retail PMI data signalled a return to growth in German retail sales, which our survey respondents attributed to mild weather and sales promotions. […] It is worth noting that wholesale price inflation fell to its lowest level since April 2010, suggesting that sales may continue to rise in coming months if retailers reduce their selling prices in a response to low cost pressures.’
The Euro to Pound Sterling (GBP/EUR) exchange rate extended its advance to 0.3% after the reports were published.
Pound weakness persisted as UK house prices were shown to have fallen. Better-than-forecast monthly increases in UK Industrial and Manufacturing Production had little impact on Sterling.
The Euro to US Dollar (EUR/USD) exchange rate was also trending higher.
BOE Leaves Stimulus Untouched, Pound Declines
The Euro to Pound Sterling (EUR/GBP) exchange rate increased its gains to 0.5% on Thursday after the Bank of England opted to leave interest rates unaltered.
The central bank held the benchmark interest rate at 0.5% in the face of slowing UK economic growth and global headwinds.
The Euro also gained on the US Dollar (EUR/USD) before the European Central Bank’s interest rate decision.
In the view of currency strategist Roberto Mialich; ‘As far as the Euro is concerned, we don’t expect that the ECB will step up its rhetoric at this stage. Tomorrow’s payroll numbers in the US will be a more critical driver for the Euro at this point.’
EUR/USD Hits Two-Year Low after ECB Decision
The European Central Bank might have opted to leave interest rates unchanged, but the tone of the statements accompanying the decision triggered widespread Euro losses and the EUR/USD exchange rate dropped to a two-year low.
As well as asserting that the ECB will be rolling out further stimulus measure in the future, if they should prove necessary, President Mario Draghi stated that the current bond buying programme will be in place for two years.
Draghi commented; ‘The risks surrounding the economic outlook for the Euro area continue to be on the downside. The weakening in the Euro area’s growth momentum, alongside heightened geopolitical risks, could dampen confidence and, in particular, private investment. In addition, insufficient progress in structural reforms in Euro area countries constitutes a key downward risk to the economic outlook’. Draghi did elude to recent reports of divisions within the ECB, but brushed them aside by stating; ‘It’s fairly normal to disagree about things. Just read recent statements about when to raise interest rates in the US. It happens in the UK, it happens in Japan. This is part of normal diversity.’
The Euro to US Dollar (EUR/USD) exchange rate losses were also due to the US publishing better-than-forecast initial jobless and continuing claims figures.
German Trade Surplus Widens, EUR Trends Higher
After plummeting against the majority of its currency counterparts in response to the European Central Bank’s exceptionally dovish policy statement, the Euro was able to recoup some of its losses on Friday.
The common currency advanced against the Pound (EUR/GBP) and US Dollar (EUR/USD) in response to a report showing that Germany’s trade surplus widened by more-than-expected in September.
Concerns of a slowdown in the Eurozone’s largest economy were eased by the news that German exports jumped by 5.5% in September, recovering from the steep decline recorded in August and beating expectations for an increase of 1.9%. Imports also rose by 5.4%.
The UK’s own trade data is likely to impact the Euro to Pound Sterling (EUR/GBP) exchange rate in the hours ahead. Similarly, the US Non-Farm Payrolls report could cause fluctuations in the Euro to US Dollar (EUR/USD) exchange rate during the North American session.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.7849,
Euro,,US Dollar,1.2512,
Euro,,Canadian Dollar,1.4259,
Euro,,Australian Dollar,1.4541,
Euro,,New Zealand Dollar,1.6130,
US Dollar,,Euro ,0.7988,
Pound Sterling,,Euro,1.2729,
Canadian Dollar,,Euro,0.7009,
Australian Dollar,,Euro,0.6874,
New Zealand Dollar,,Euro,0.6194,
[/table]
