The Euro to Pound Sterling (EUR/GBP) exchange rate exchange rate hit a two-year low last week after Scotland opted to retain its place in the United Kingdom. While the Pound went on to trim its initial, considerable gains as investors engaged in profit taking and investors questioned the direction UK politics will take, the common currency continued to struggle against its British cousin.
On Monday the Euro modestly extended declines against the Pound after Italy released concerning industry orders/sales figures.
On a seasonally adjusted basis, Italian industrial orders dropped by 1.5% month-on-month in July, mirroring the sharp fall recorded in June. Orders were down by a non-seasonally adjusted 0.7% year-on-year.
Industrial Sales fell by 1.0% on the month and eased 1.3% lower on the year.
Although Italy’s economy has made progress since the dark days of the height of the global economic crisis, the nation is still underperforming many of its peers and weighing on the performance of the Eurozone as a whole.
In the opinion of some industry experts, while Italy remains part of the 18-nation currency bloc the situation is only going to worsen.
According to Roger Bootle of The Telegraph; ‘Like the rest of the Eurozone, what Italy needs most immediately is decent economic growth. Perhaps some Europe-wide upturn will be achieved through a combination of ECB boldness and German fiscal relaxation. But I wouldn’t bank on it. The radical option is for Italy to leave the Euro and allow a weak currency to generate an export boom, higher inflation, more taxes and an easier debt burden.’
The Euro to Pound Sterling (EUR/GBP) exchange rate hit a high of 0.7873
Over the weekend the G-20 gathered to discuss market volatility and the impact of low interest rates.
During the meeting one Governing Member of the European Central Bank asserted that the central bank might not have to introduce additional stimulus measures.
The comparative failure of last week’s Targeted Long Term Refinancing Operations has prompted many industry experts to assert that the ECB needs to unleash full-scale quantitative easing in order to bolster the Eurozone’s recovery.
However, in the opinion of ECB member Ignazio Visco, the current weakness in the Euro could negate the need for such actions. He stated; ‘Inflation expectations have to be back where they were. This doesn’t mean that there will be a next step. We have been bold enough to reduce interest rates to a level that was unexpected to the market.’
A lack of UK news is likely to limit movement in the EUR/GBP pairing in the hours ahead, although investors will be taking a keen interest in ECB President Mario Draghi’s speech in Brussels and the Eurozone’s Consumer Confidence index.
The EUR/USD pairing hit a low of 1.2837
The Euro was trading in a slightly stronger position against the US Dollar on Monday despite investors betting that the Federal Reserve will increase interest rates in the spring of next year.
Last week the ‘Greenback’ came under a little pressure as a result of disappointing US inflation figures. However, the Fed’s decision to upwardly revise its interest rate expectations gave the US Dollar support against most of its peers.
Today’s US Existing Home Sales data could trigger EUR/USD movement before the close of trade.
EUR/GBP Exchange Rate Forecast
Tomorrow the direction taken by both the Euro to Pound (EUR/GBP) and Euro to US Dollar (EUR/USD) exchange rates will be dependent on economic reports for the Eurozone, including French and German Manufacturing, Services and Composite PMI’s. Concerning figures from France would be detrimental to the Euro.
The UK’s public finance figures will also be worth noting, as will the US Manufacturing PMI.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7864
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2710
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.7864,
Euro,,US Dollar,1.2854,
Euro,,Canadian Dollar,1.4107,
Euro,,Australian Dollar,1.4429,
Euro,,New Zealand Dollar,1.5797,
US Dollar,,Euro ,0.7781,
Pound Sterling,,Euro,1.2710,
Canadian Dollar,,Euro,0.7088,
Australian Dollar,,Euro,0.6926,
New Zealand Dollar,,Euro,0.6323,
[/table]
