The Euro to Pound Sterling (EUR/GBP) exchange rate weakened on Friday after policy makers from Germany’s Bundesbank attacked the idea of Quantitative easing and said that the ECB policy is too loose. The Euro was also weakened by weak GDP data.
‘You cannot simply apply the same formula in Europe that has enjoyed success in the U.S. or in Japan. In the USA, there is a central state that issues bonds that are very safe and secure. We don’t have that central state here,’ said Bundesbank chief Jens Weidmann
The Euro to Pound Sterling (EUR/GBP) exchange rate held onto gains as it received support from the release of better than forecast German factory order data and Thursdays comments by the European Central Bank regarding quantitative easing.
Official data earlier showed that German factory orders rose 2.5% in October, exceeding expectations for a 0.6% gain. Factory orders in September were revised to an increase of 1.1% from a previously estimated 0.8% rise.
The Euro to Pound Sterling (EUR/GBP) exchange rate rallied strongly later on Thursday after the European Central Bank ruled out quantitative easing until the next quarter at the earliest.
‘The central bank did not announce any further liquidity measures and certainly didn’t indicate any immediate intentions to implement full blown QE. It’s a bit at odds with the most recent rhetoric and provides a boost to the euro, if only a temporary one. It wouldn’t surprising to see the ECB push the idea early next year, putting more pressure on the single currency,’ said economist Alex Edwards.
Earlier the Euro to Pound Sterling (EUR/GBP) exchange rate was trading in the region of 0.785 as the European Central Bank and Bank of England interest rate decisions came closer to being released.
The Euro to Pound Sterling (EUR/GBP) exchange rate is forecast to weaken on Thursday as economists raise their bets that the European Central Bank will announce new stimulus measures to tackle low inflation and encourage growth across the embattled currency bloc.
Pound Sterling Exchange Rate Softer on Autumn Statement Concern
Earlier in the session, the Euro moved away from its lowest level in a month against the Pound as the UK currency came under pressure from concerns over Wednesday’s autumn statement delivered by Chancellor George Osborne. Forecasters are forecasting that public spending will fall to levels not seen since the 1930’s as the government tries to get the national deficit under control.
French Unemployment Back to Record Highs
Economic data from France showed that unemployment in the Eurozone’s second largest economy increased back to record levels of 10.4%. The rise means that a year’s worth of slow progress in getting unemployment lower has been wiped out and heightened fears that the nation will return to recession next year. Analysts had been expecting the unemployment to rise to 10.3%.
No Changes Forecast from BoE or ECB
Economists are now focusing on the upcoming policy meetings of the Bank of England and European Central Bank for direction. The BoE is expected to leave interest rates unchanged at 0.5% and keep its monthly quantitative easing programme at £ 375 billion.
The ECB too is likely not to make any changes to its record low interest rate of 0.05%. Analysts however will be watching the final ECB press conference of the year closely for any indication as to whether policy makers are edging closer to introducing new stimulus measures. The Eurozones banks are also likely to continue to be charged 0.2% to leave cash with the ECB.
‘The main event of the day is the ECB meeting, almost universally expected to see no policy move. Mario Draghi’s final press conference of the year does afford an opportunity for his to go off piste however, something he has done before,’ said Kit Juckes an economist at Societe Generale.
Euro to Pound Sterling (EUR/GBP) Exchange Rates –
The Euro to Pound (EUR/GBP) Exchange Rate Hit a Session High of 0.7924.
The Euro to Pound (EUR/GBP) Exchange Rate Hit a Session Low of 0.7868.
The Euro to Pound (EUR/GBP) Exchange Rate is trading in the Region of 0.7875.
