The Pound to Euro (GBP/EUR) exchange rate surged to a two-year high on Thursday as the common currency floundered.
Recent ecostats for the Eurozone have been far from impressive, and yesterday’s German Business Confidence measures from the IFO added to concerns that the Eurozone’s largest economy is entering a period of either stagnation or contraction.
The GBP/EUR exchange rate pushed above 1.28 over the course of the European session, gaining by more than 0.5%.
Demand for the Euro was also undermined by European Central Bank President Mario Draghi. In an interview the central bank chief implied that the ECB is prepared to roll out quantitative easing if it proves necessary.
The Euro has been steadily declining against rivals like the US Dollar and Pound since the ECB took the unprecedented step of introducing a negative deposit rate earlier in the year, and some officials have gone so far as to say that the weakness in the domestic currency might have enough impact to negate the need for additional stimulus.
Others, however, are less sure of this and believe the ECB will have to bring in QE to shore up the Eurozone’s flagging recovery.
In the opinion of forex-researcher Thomas Flury; ‘Draghi’s main message is clear. The ECB wants to have a big balance sheet, and there’s a problem with deflation expectations, and therefore they will do more.’
The Pound to Euro (GBP/EUR) exchange rate hit a high of 1.2842.
Meanwhile, the Pound’s advance against the Euro was aided by the UK’s Average Weekly Earnings data coming in at 3.3% year-on-year in July. This was up from 2.9% in June.
The Confederation of British Industry’s Reported Sales index did slip from an unusually high 37 in August to 31 in September, but the result was of little concern to investors.
As stated by economist Rain Newton-Smith; ‘Solid growth continues on the high street, with most sectors doing decent business and department stores performing particularly well. However, the pace of growth in the grocery sector tailed off significantly compared with the previous survey.’
Bank of England Governor Mark Carney lent Sterling additional support during a speech in Wales.
Carney intimated that the argument in favour of hiking interest rates is becoming increasing balanced, stating; ‘With many of the conditions for the economy to normalise now met, the point at which interest rates also begin to normalise is getting closer. While there is always uncertainty about the future, you can expect interest rates to begin to increase.’
The Pound to US Dollar (GBP/USD) exchange rate was trending in a comparatively narrow range as the US Dollar was supported by better-than-expected jobless claims figures. The ‘Greenback’s strength was a little tempered by steeper-than-forecast declines in the Markit measures of US Services and Composite PMI.
US Durable Goods Orders also fell by slightly more than anticipated, dropping 18.2% rather than the 18.0% expected.
The Pound to US Dollar exchange rate hit a high of 1.6342.
Pound Sterling (GBP) Exchange Rate Forecast
The Pound is likely to continue trending in a stronger position into the weekend, and may extend its advance against the Euro if tomorrow’s GfK Consumer Confidence gauge declines as anticipated.
The Pound Sterling to Euro exchange rate may also be affected by the UK’s Hometrack Housing Survey.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6338,
Pound Sterling,,Euro,1.2826,
Pound Sterling,,Australian Dollar,1.8551,
Pound Sterling,,New Zealand Dollar,2.0562,
US Dollar,,Pound Sterling,0.6125,
Euro,,Pound Sterling,0.7787,
Australian Dollar,,Pound Sterling,0.5387,
New Zealand Dollar,,Pound Sterling,0.4882,
[/table]
