The Euro to Pound Sterling (EUR/GBP) exchange rate drifted lower during the European session as the Eurozone’s economic fundamentals outstripped those of the UK.
The Pound came under pressure early into trading as the UK’s GfK Consumer Confidence index registered its first monthly decline for six months.
It had been hoped that the sentiment gauge would advance from 1 to 2 in July but it actually slid to -2.
Nick Moon, GfK’s Managing Director, issued the following statement with the figures; ‘No sooner had the index crossed into positive territory last month – for the first time in nearly 10 years – than it fell back into the negative […] All five of the component parts of the index fell this month, with four-point drops in both the questions about the country’s general economic situation being particularly noticeable […] the government will be hoping this is just a temporary setback rather than the forerunner of a wider decline in confidence.’
Further Pound Sterling weakness was triggered after UK home prices were shown to have risen at their slowest pace for 15 months in July and the Bank of England’s Deputy Governor asserted that the nation’s ‘overheating’ housing market was cooling.
Meanwhile, the Euro derived some modest support from a number of economic reports for the Eurozone and its largest economies.
The day started out fairly well, with German retail sales being shown to have increased by 1.3% on a monthly basis in June, wiping out the previous month’s -0.6% decline and beating estimates for an increase of 1.0%.
However, on the year sales climbed by just 0.4%, far less than the 1.3% annual growth forecast.
This report was followed by another detailing a decline of -12,000 in the level of unemployment in Germany. Joblessness was only expected to have fallen by -5,000. The seasonally adjusted unemployment rate held at 6.7% in July.
As the European session continued, so did the good news as the unemployment rates for the Eurozone as a whole and Italy dipped unexpectedly.
The rate of unemployment in the 18-nation currency bloc stood at 11.5% in June, down from 11.6% the previous month.
However, it wasn’t all good news for the Eurozone and the common currency later went on to soften against several of its most traded currency counterparts following the publication of the region’s Consumer Price Index.
The gauge of inflation slowed from 0.5% to 0.4% in July, the weakest reading for nearly five years. In the opinion of some economists, the result makes it increasingly likely that the European Central Bank will need to deploy additional stimulus measures in the near future.
However, not all industry experts hold the same view. In the opinion of macro researcher Nick Kounis; ‘This is most likely the trough in inflation, and inflation will move slowly upwards from here. It seems unlikely the ECB will take fresh measures to ease policy further – I don’t see this as a trigger for a large-scale quantitative easing programme, as long as this proves the trough.’
Further pressure was piled on the Euro after Banco Espirito Santo announced losses of 3.6 billion Euros.
Euro to Pound Sterling Forecast
The Euro to Pound exchange rate is likely to experience additional fluctuations as the day continues.
Further movement in the pairing could take place tomorrow following the publication of German Manufacturing PMI and UK Manufacturing PMI.
If the German result is positive and the UK figure disappoints the Euro to Pound Sterling pairing could end the week on a bit of a high.
Market movement is also likely to be caused by the US Non-Farm payrolls figure.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7931.
UPDATED 09:10 01 August, 2014
Euro to Pound Steady, Additional Volatility Likely Before Weekend
The EUR to GBP exchange rate began today trading in a narrow range.
In the hours ahead the Euro to Pound pairing could fluctuate in response to various manufacturing PMI reports.
Italy’s PMI unexpectedly fell from 52.6 to 51.9 while Germany’s measure dropped from 52.9 to 52.4 and the index for the Eurozone as a whole slipped from 51.9 to 51.8.
France, the so called ‘poor man of Europe’ remained in contraction territory, although it’s own PMI did creep up from 47.6 to 47.8.
The Euro to Pound exchange rate is currently trending in the region of 0.7928 but further fluctuations are forecast to occur following the release of the UK’s own manufacturing measure.
UPDATED 16:35 GMT 04 August, 2014
EUR to GBP Exchange Rate Weaker Today
On Monday the Euro (EUR) softened slightly against the Pound (GBP) as the Eurozone’s Sentix gauge of investor confidence dropped by considerably more than anticipated.
The sentiment measure had been forecast to soften from 10.1 to 9.0, but it actually fell to 2.7.
The extensive decline was largely due to geopolitical concerns in Russia and Ukraine.
The Pound’s 0.2% advance on the Euro was also aided by an above-forecast UK Construction PMI.
Tomorrow considerable EUR to GBP exchange rate fluctuations can be expected to follow the publication of the Eurozone’s retail sales figure for June.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.7931,
Euro,,US Dollar,1.3385,
Euro,,Canadian Dollar,1.4599,
Euro,,Australian Dollar,1.4413,
Euro,,New Zealand Dollar,1.5760,
US Dollar,,Euro ,0.7471,
Pound Sterling,,Euro,1.2600,
Canadian Dollar,,Euro,0.6841,
Australian Dollar,,Euro,0.6936,
New Zealand Dollar,,Euro,0.6341,
[/table]
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