UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a tight range on Friday morning.
In the aftermath of the Federal Reserve’s decision to hold the cash rate, the Pound Sterling edged lower versus its major peers. This is due to speculation that the Bank of England (BoE) are waiting for the Federal Reserve to hike the benchmark interest rate first, so long delays from the Fed equate to long delays for the BoE. The shared currency, meanwhile, also softened versus many of its currency rivals despite recent EUR/USD negative correlation. The US Dollar’s downtrend has not caused the Euro to rally because investors fear that the dovish Fed will cause the European Central Bank (ECB) to ease policy sooner-than-anticipated.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3641.
Yesterday…
GBP/EUR Conversion Rate Predicted to Hold Losses ahead of FOMC Rate Decision
The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.1% on Thursday afternoon.
British economic data showed retail sales growth failed to meet with expectations, causing the Pound to trend lower versus its major peers. The poor results haven’t been hugely impactful, however, with trader focus dominated by the forthcoming Federal Open Market Committee (FOMC) interest rate decision.
On the year, August’s Retail Sales came in at 3.5%, which failed to meet with the market consensus of 3.8% growth. Falling food prices were the cause of the slower-than-expected growth, although rising clothes prices saw retail sales avoid a larger declination. Retail Sales including Auto Fuel came in at 3.7% on the year in August; failing to meet with the median market projection of 3.7%. Despite the weaker-than-anticipated retail sales growth, the figures show growth continues thanks to improving labour market conditions.
‘Small stores were particularly boosted in August by sales of school uniforms, while most of the growth in large stores was coming from online,’ Kate Davies, head of retail sales statistics at the ONS said.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3718.
EUR/GBP Exchange Rate Forecast to Edge Higher despite Dovish ECB
In spite of the fact that the European Central Bank (ECB) Economic Bulletin was dovish in tone, the single currency appreciated versus many of its closest currency peers on Thursday. The ECB report showed officials were concerned about downside risks as a result of the lack of inflationary pressures. The report emulated a speech given by President Mario Draghi following the most recent interest rate decision, which could account for its lack of impact on the common currency.
European economic data produced positive results on Thursday which aided the Euro’s uptrend. Eurozone Construction Output advanced by 1.8% on the year in July which was a vast improvement over the previous contraction of -1.2%. On the month, July’s Construction Output in the Eurozone advanced by 1.0%. The improvement in the Eurozone’s construction sector was led by over 4% growth in Swedish construction output.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3657 during Thursday’s European session.
Pound Sterling to Euro (GBP/EUR) Conversion Rate Forecast to Fluctuate on FOMC Interest Rate Decision
Given that the Federal Reserve interest rate decision is very likely to cause significant changes in the currency market, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to fluctuate. Should the Fed opt to hike the rate, the Pound could advance versus the shared currency as the Bank of England (BoE) would be pressured into raising the benchmark interest rate to avoid a long period of wide policy divergence.
Looking ahead to Friday, the GBP/EUR exchange rate could see subdued volatility given the complete absence of British economic data and a lack of influential European data. However, currency positioning rests on the outcome from the FOMC interest rate decision so the pairing could see heightened volatility depending on whether Fed policymakers choose to stick or twist.
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.3744 during Thursday’s European session.
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