The Euro to Pound Sterling exchange rate edged away from a 5-week high as mixed data out of the Eurozone and the upcoming European Central Bank policy meeting weighed upon demand for the single currency.
Also putting pressure on the Euro is the muted trade in the markets as concerns over a possible new banking crisis in Portugal shook investor confidence.
The single currency experienced mixed trading following the release of data which showed that sentiment in the Eurozone fell sharply in August as the European Union’s sanctions against Russia raised concerns that the region could be negatively impacted.
According to the survey compiled by Sentix, confidence in the 18-member currency bloc tumbled to a reading of 2.7, the lowest level of the year so far and well below economists’ expectations for the index to ease from July’s figure of 10.1 to 9.0.
‘After last month’s recovery the euro zone Sentix index has suffered a painful set-back, As this slump derives from an event which is subject to politics and power play, the central banks, particularly the European Central Bank (ECB), will have difficulty in trying to counter this,’ Sentix said.
Sentiment was also knocked by fears over a possible new banking crisis emerging out of Portugal. On Sunday the nation’s central bank announced a rescue plan for the troubled Banco Espirito Sancto.
The Bank injected almost €5 billion into the struggling lender in an effort to stave off the threat of contagion.
The problems in the banking sector add to Portugal’s problems. In 2011 the country had to be bailed out by €78 billion provided by the ECB and International Monetary Fund.
The Euro did manage to find some support from a separate report which showed that Producer Price Inflation in the Eurozone increased for the first time in six months.
Despite the rise to 0.1% investors were little impressed and continued to bet against the single currency ahead of the ECB’s latest policy meeting due to be held on Thursday.
Economists are widely expecting that the Central Bank will introduce new monetary easing measures in order to tackle the threat of deflation.
Euro to Pound Sterling Exchange Rate Forecast
The Euro could push higher against the softened Pound if the latest composite PMI data out of Germany and the wider region come in positively.
Retail sales data for the Eurozone are also due to be published and analysts are forecasting a rise both on a monthly and yearly basis. Gains could be restrained however if data out of France continues to disappoint.
Unemployment data out of Portugal is also likely to play a part.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.3419 ,
Euro,, Pound Sterling,0.7970 ,
Euro,,Australian Dollar,1.4408 ,
Euro,,Canadian Dollar,1.4662 ,
Pound Sterling,,Euro,1.2540 ,
US Dollar,,Euro,0.7452 ,
[/table]
Comments are closed.