As the week drew to a close the Pound to Euro (GBP/EUR) exchange rate strengthened broadly following dovish comments by European Central Bank (ECB) President Mario Draghi.
The Pound to Euro (GBP/EUR) exchange rate continued to push above the 1.25 level on Thursday as the UK currency was supported by stronger than forecast retail sales data.
The GBP/EUR exchange rate reversed earlier losses on Thursday to push higher as data PMI data out of the Eurozone came in below expectations, increasing concerns over the health of the regions economy
The Pound exchange rate rallied strongly against the Euro on Wednesday as the latest Bank of England minutes showed that less policy makers than forecast voted in favour of interest rate rises.
The Pound to Euro (GBP/EUR) exchange rate fell to a one-month low on Tuesday as data showed that European car sales and Eurozone economic sentiment soared and as UK inflation rose more than forecast.
Data released early in the session showed that European car sales increased by 6.2% in October putting the regions car market on course to make its first annual gain since 2007. Price cuts made by a number of leading car manufacturers led to registrations across Europe rising by 1.11 million last month.
‘There’s a clear gap between economic growth in Europe, which remains sluggish, and the sales momentum we’re seeing in the auto sector. That could be explained by the need for customers to replace their old cars, as the European fleet age is high,’ said Jean-Francois Belorgey, head of consulting company EY’s automotive business.
After the European car data release, came the UK inflation figures. Inflation increased by 1.3%, beating forecasts for a number of 1.2%. The rise was not seen as a positive however, as the rise in inflation wipes out the preceding months wage growth data and did little to convince economists.
‘Going forward, risks remain firmly skewed to the downside amid declining oil prices, emerging signs of another slowdown in global economic activity and subdued wage pressures. We do not envisage a Bank of England interest rate increase until well into the second half of 2015,’ said Mark Miller, UK analyst at the Economist Intelligence Unit.
The Euro then surged higher against the majority of its most traded peers as Germany’s ZEW investor sentiment index soared out of negative territory.
Economists had been expecting the ZEW index to rise by just 0.5 from the -3.6 seen in October. The data took everyone by surprise by leaping to 11.5.
The ZEW index for the wider Eurozone soared from 4.1 to 11.
Economists will now be looking ahead to Wednesdays BoE minutes for further guidance on the GBP/EUR exchange rate.
