Euro (EUR) Seeing Improvement despite Contraction in German Import Prices, Trading on ‘Buck’ (USD) Cautious Today
Although the GBP/EUR conversion rate is ceding ground this morning, in anticipation of fresh UK and Eurozone data, the GBP/USD currency pair remains on an uptrend. As US Consumer Confidence is forecast to fall this afternoon the ‘Greenback’ (USD) could continue to retreat in spite of an abundance of hawkish sentiment.
Earlier…
In spite of a slow day for economic releases, the Pound (GBP) has made gains against both the Euro (EUR) and the ‘Buck’ (USD) today, as rate hawks were disappointed by US data and Volkswagen developments weighed on sentiment towards the single currency.
Volkswagen Scandal Threatening to Engulf Eurozone Economy Today to Boost GBP/EUR Currency Pair with Trader Dovishness
Although the last week saw the Pound (GBP) decline significantly on the back of a widened UK deficit and dovish commentary from Bank of England (BoE) policymakers, the fortunes of Sterling have picked up somewhat today. While domestic data has been lacking, the GBP/EUR exchange rate has advanced as the result of a downturn in demand for the common currency (EUR). As both Skoda and Audi have now admitted to also installing so-called ‘defeat devices’ in a number of their own diesel models, the emissions scandal that originated with Volkswagen appears to be spreading to potentially endanger the entire automobile industry. Given the major role this particular industry plays within the German economy, itself the central economic powerhouse of the wider Eurozone, traders have become decidedly more cautious with regards to the Euro today. As such, the GBP/EUR conversion rate is currently trending in the region of 1.3545.
Euro (EUR) Downturn may Continue with German Inflationary Data and Potential Indication of Imminent ECB Intervention
German Consumer Price Index data due for release tomorrow may prompt a rally for the single currency, so long as results come in above predictions of a decrease. With domestic inflation slated to show a decline over the previous month, however, the Euro could cede further ground to rivals. In spite of European Central Bank (ECB) policymakers, including President Mario Draghi, having commented that the case for fresh monetary loosening remains less than compelling, any signals of a weakening Eurozone economy could prompt a decided turnaround in outlook.
‘Greenback’ (USD) Fails to Derive Boost from Personal Consumption Expenditure Figures Today with Pending Home Sales Shortfall
This afternoon’s raft of US data was not as conclusively supportive of a near-term Fed interest rate hike as pundits might have wished. While the year-on-year Personal Consumption Expenditure Core rose in line with expectations, the August Pending Home Sales showed an unanticipated decline to fall short of forecasts, at 6.7% instead of a markedly more positive 8.1%. With investor reaction mixed and hawks somewhat disappointed, the ‘Greenback’ (USD) has experienced limited movement in response to this latest stimulus.
GBP/USD Exchange Rate Could Slump on Upcoming US Employment Data and Manufacturing PMI
Nevertheless, with the US Unemployment Rate and Change in Non-Farm Payrolls due for publication at the end of the week, and the September Manufacturing PMI in the meantime, the ‘Buck’ may soon return to bullish form. Friday’s employment figures will be of particular note to those speculating on the odds of a 2015 interest rate hike from the Fed, given the importance which policymakers place upon these particular economic indicators. Improved numbers would likely fuel a fresh round of hike bets, possibly paving the way for the Federal Open Market Committee (FOMC) to comfortably raise rates at the October session.
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