Pound Sterling to Euro (GBP/EUR) Exchange Rate Reverses Decline
A softer-than-anticipated Producer Price Index for Germany helped the Pound Sterling to Euro (GBP/EUR) exchange rate recover much of the previous day’s declines.
Although the ZEW economic sentiment surveys for Germany and the Eurozone came in above forecast levels, the Pound’s uptrend against the Euro continued ahead of tomorrow’s UK employment figures and Thursday’s ECB announcement.
According to forex strategist Jon Hardy; ‘The main interest has been the big Euro-Sterling drop and to what degree that has been inspired by anticipation of the ECB and to what degree was it aggravated by the SNB walking away from the Euro-Swiss floor. My inclination is to believe its going to head a bit lower, but there are some long-term structural issues with the UK and the Pound will be relatively constrained to the downside.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading in the region of 1.3098
GBP/EUR Exchange Rate Declines by 0.4%
The Pound Sterling to Euro (GBP/EUR) exchange rate lost around 0.4% on Monday.
The movement in the pairing had little to do with the low-volatility data published in the UK and Eurozone and more to do with the fact that some economists are expecting the European Central Bank’s stimulus measures to undershoot expectations.
The ECB has promised much and delivered little on several other occasions so it is entirely likely that the central bank could fail to introduce the level of support expected.
As the prospect of expansive measures have been factored in, the Euro could bounce higher if the ECB disappoints.
Today’s Eurozone figures showed a narrowing in the region’s current account surplus and a slight monthly dip in construction output.
The UK’s Rightmove House Price report revealed an increase in property values.
The Pound Sterling to Euro (GBP/EUR) is currently trading in the region of 1.3036.
Earlier…
GBP/EUR Exchange Rate Softer Ahead of Eurozone Data
As some economists bet that the Euro’s recent declines were overdone, and others hinted that the European Central Bank (ECB) could disappoint stimulus expectations when it gathers later this week, the Pound Sterling to Euro (GBP/EUR) exchange rate shed around 0.2%.
If the Eurozone’s Current Account and Construction Output reports deliver positive results, the GBP/EUR could further pare last week’s surge.
Earlier…
The Pound Sterling to Euro (GBP/EUR) exchange rate surged beyond a seven-year high at the tail end of the week, but even higher levels could be achieved by the pairing in the days ahead.
Euro (EUR) Broadly Softer after SNB Chaos, Pound (GBP) Climbs
The currency markets experienced almost unprecedented volatility on Thursday as the Swiss National Bank (SNB) pulled the rug out from under the feet of investors, economists and industry officials.
For months the SNB has stressed that it will deploy all the measures within its power to ensure that the ‘vital’ Euro to Swiss Franc (EUR/CHF) cap of 1.20 remains in place.
However, the central bank acted in defiance of all its protestations and removed the cap while simultaneously cutting its interest rate further into negative territory.
Industry expert Axel Merk said of the decision; ‘Quite extraordinary and unheard of. Two-thirds of the banks weren’t quoting the Swiss Franc, suggesting big banks have gotten burnt.’
The results were instantaneous and catastrophic for the currency market.
While the Franc surged across the board, achieving record levels against most of its currency peers, the Euro plummeted as demand for the common currency nosedived.
The SNB’s decision was taken as a sign that the central bank has insider knowledge of the European Central Bank’s (ECB) quantitative easing plans, and economists are now envisaging the introduction of more aggressive measures than previously anticipated.
As highlighted by economist Ken Wattret; ‘There are a series of trade-offs involved in [designing QE] and whatever is announced will probably not satisfy everyone. Any adverse impact stemming from a reluctance to mutualise risk could be offset by a strong signal that the ECB is willing to buy in large scale in order to raise inflation expectations.’
The Pound Sterling to Euro (GBP/EUR) exchange rate accordingly surged above the 1.31 level and held these gains into Friday.
The GBP/EUR currency pair achieved a high of 1.3161 before the close of trade.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Could Gain on Jobs Data
Next week the Pound Sterling to Euro (GBP/EUR) exchange rate could extend its advance in response to the UK’s employment figures.
Last month’s report showed that the UK’s unemployment rate registered at 6.0% in the three months to November after a jobs gain of 115,000.
The British labour market has shown real improvement in the last 12 months and recent reports suggest that graduate employment prospects are at a 10-year high.
Universities minister Greg Clark recently stated: ‘Confidence in the economy continues to grow, and this is reflected in the fact that Britain’s top companies will recruit more graduates this year than they have for a decade. This report will be warmly welcomed by the record number of students who started university this year and highlights how a degree remains one of the best routes into a rewarding career.’
Another strong employment increase would be Pound beneficial, while an uptick in average earnings could help bring forward Bank of England (BoE) interest rate hike projections.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Fluctuate after ECB Announcement
Of course, extensive GBP/EUR volatility is likely to follow the European Central Bank’s policy decision. The central bank is expected to introduce quantitative easing measures.
A bigger bond buying package than projected would see the Euro consolidate and extend this week’s declines and could push the Pound Sterling to Euro (GBP/EUR) exchange rate to fresh highs.
On Friday the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3152
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7605
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in the region of 1.5131
The Euro to US Dollar (EUR/USD) exchange rate was trading in the region of 1.1501
