Euro (EUR) Exchange Rate Slumps after ECB Stresses Possibility of Additional Quantitative Easing
Following more dovish commentary from European Central Bank (ECB) President Mario Draghi the Euro to Pound Sterling (EUR/GBP) exchange rate has given up some of its recent gains. With pundits a little more optimistic ahead of the latest UK Public Sector Net Borrowing figure the EUR/GBP exchange rate is trending lower at 0.7610.
Earlier…
With a resurgence in global risk aversion the Euro (EUR) has been bolstered ahead of today’s European Central Bank (ECB) policy meeting, as the Pound (GBP) continues to retreat on the back of unimpressive UK wage growth.
Dovish BoE and Slowing Domestic Wage Growth Prompts Pound Sterling (GBP) Slump
Strength has continued to desert the Pound Sterling (GBP) in the wake of Bank of England (BoE) Governor Mark Carney’s indication that interest rates are likely to stay low for some time to come. As pundits had previously been pricing in a second or third quarter rate hike the diminished likelihood of monetary tightening in 2016 saw the Pound slump sharply across the board on Tuesday.
Although the latest ILO Unemployment Rate showed an unexpected decrease yesterday, to dip from 5.2% to 5.1%, this failed to support Sterling as traders were more concerned by the weaker growth in Average Weekly Earnings, which clocked in at 2.0% rather than 2.1% for the three months to November. Given that BoE policymakers have previously indicated the need to see stronger wage growth before supporting an interest rate hike this prompted the Pound to weaken further against rivals.
Euro (EUR) Exchange Rate Climbs ahead of ECB Policy Meeting Today
Despite persistently low Eurozone inflation and disappointing German Producer Price figures, the Euro (EUR) has returned to more bullish form, largely thanks to a fresh downturn in global stock markets. As Chinese Foreign Direct Investment was revealed to have fallen sharply on the year in December, printing at a decline of -5.8% rather than the forecast 3.1% uptick, confidence in the health of the world’s second largest economy declined further.
Ahead of today’s European Central Bank (ECB) policy meeting the single currency has remained in higher demand, as investors continue to be dismissive of the likelihood that policymakers will opt to introduce further monetary loosening at this juncture. While ECB President Mario Draghi is anticipated to take a more dovish tone in comments, markets are less inclined to take the policymaker at his word following the disappointment of the central bank’s December meeting.
EUR/GBP Exchange Rate Forecast: Weaker German PMIs to Weigh on Euro Demand
Some of the Euro’s dominance may be eroded ahead of the weekend, however as the latest raft of German PMIs are expected to show that the economy has slowed somewhat at the start of 2016. Any indications of weakness within the Eurozone’s powerhouse economy are likely to dent sentiment towards the single currency, as global slowdown concerns continue to present a downside risk to domestic economic growth.
The Pound, meanwhile, will be hoping to rally on the back of the December Public Sector Net Borrowing figure, with new government debt forecast to have risen by 10.0 billion Pounds in December. As this would be a more limited widening of the deficit than shown by November’s 13.6 billion increase demand for Pound Sterling may see some resurgence on Friday.
Current EUR, GBP Exchange Rates
At the time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was making gains around 0.7679, while the Pound Sterling to Euro (GBP/EUR) pairing was slumped around 1.3018.
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