The Euro to GBP exchange rate was struggling as trading began on Wednesday and the pairing later fell to a 21-month low as Sterling surged in response to upbeat UK reports.
The appeal of the Pound was bolstered by impressive UK manufacturing data on Tuesday and investors lost faith with the Euro amid a stream of lacklustre manufacturing and employment figures for the Eurozone.
Further Sterling gains occurred on Wednesday as UK house prices were shown to have increased by far more than economists had anticipated in June.
On a month-on-month basis, priced climbed by a seasonally adjusted 1% in June, double the 0.5% increases expected. House prices were up 11.8% on the year, another much higher-than-forecast result.
As the UK’s overheating housing market has been one of the major arguments in favour of the Bank of England increasing interest rates, this latest report could up the odds of borrowing costs being hiked in November this year.
Later in the European session, the UK published its Markit Construction PMI report for June. Just like yesterday’s manufacturing report, this data wildly exceeded expectations.
The gauge stood at 60 in May, and economists had projected a reading of 59.8 for June. However, it actually advanced to 62.6 – demonstrating that the UK’s economy continues to go from strength to strength.
The report saw David Noble, of the Chartered Institute of Purchasing and Supply, comment; ‘The construction boom ramped up to a four-month high in June, fuelling the strongest rise in job creation in the survey’s history. New orders accelerated sharply this month, with much of the increase driven by the expanding housing market and supported by improved commercial activity.’
Meanwhile, the Eurozone’s Producer Price Index showed that prices edged lower for a fifth month in May.
Prices were down 0.1% on a month-on-month basis and had dropped by 1.0% on the year. As price pressures have been a major cause for concern among European Central Bank policy makers, this report weighed on the Euro.
As highlighted by economist Howard Archer; ‘The further dip in producer prices in May is clearly unwelcome news for the ECB as it points to consumer price inflation remaining very low.’
After all the European reports were published the Euro to GBP exchange rate fell by 0.20%.
The Pound broadly strengthened and was able to brush a 21-month high of 1.2573 against the Euro before it softened slightly to trade in the region of 1.2556.
Later today further market movement could be triggered by US Factory Orders and employment data, as well as a speech due to be given by Federal Reserve Chairwoman Janet Yellen.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.7962,
Euro,,US Dollar,1.3661,
Euro,,Canadian Dollar,1.4524,
Euro,,Australian Dollar,1.4444,
Euro,,New Zealand Dollar,1.5599,
US Dollar,,Euro ,0.7320,
Pound Sterling,,Euro,1.2560,
Canadian Dollar,,Euro,0.6886,
Australian Dollar,,Euro,0.6924,
New Zealand Dollar,,Euro,0.6420,
[/table]
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