The Pound Sterling to Euro (GBP/EUR) exchange rate edged slightly lower on Friday as investors digested Germany’s positive factory orders data.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Struggles after ECB Decision
On Thursday the Euro advanced on its British peer in response to the European Central Bank’s (ECB) interest rate decision.
Instead of introducing additional stimulus measures, as some industry experts expected, the central bank asserted that it would be observing the situation into the new year and adjust policy according to the Eurozone’s performance.
The inaction saw the GBP/EUR exchange rate drop, and the pairing posted additional declines towards the close of the week as the German factory orders report showed month-on-month expansion of 2.5% – considerably more than the 0.5% increase anticipated.
The Pound Sterling to Euro (GBP/EUR) Exchange Rate lost over 0.6% following the Bank of England (BoE) and European Central Bank (ECB) policy announcements.
GBP/EUR Exchange Rate Falls as ECB Leaves Policy Unchanged
With both the BoE and ECB leaving interest rates unaltered, the GBP/EUR exchange rate fell to a low of 1.2641.
Although the likelihood of the BoE increasing interest rates declined markedly as UK ecostats softened and the rate of inflation decelerated, some industry experts still had hopes that the central bank might raise borrowing costs before Christmas.
This hope has now been extinguished and demand for the Pound has fallen accordingly.
The fact that the ECB refrained from rolling out additional stimulus measures was also seen as Euro-supportive and helped the common currency pare declines against its British peer.
Earlier…
The Pound Sterling to Euro (GBP/EUR) exchange rate rallied to beyond 1.27 and struck a three-week high on Wednesday as positive UK developments and disappointing Eurozone data altered sentiment.
GBP/EUR Exchange Rate Jumps on Services PMI, Autumn Statement
The UK’s unexpectedly strong Services PMI print gave the Pound a significant boost on Wednesday, and further Pound Sterling to Euro (GBP/EUR) gains were achieved after the Eurozone released disappointing Services PMI and Retail Sales figures.
The GBP/EUR exchange rate achieved a high of 1.2760.
The Pound was then able to consolidate and extend gains as Chancellor of the Exchequer George Osborne delivered the Autumn Statement.
Although there were negative aspects to the statement, including the potential loss of a million public sector jobs over the next five years and the budget deficit narrowing by less-than-expected, UK growth forecasts were positively revised.
The government now envisages expansion of 3% this year.
Osborne was also positive about the UK’s economic performance, asserting; ‘Today, against a difficult global backdrop, I can report higher growth, lower unemployment, falling inflation, and a deficit that is falling too. Today a deficit that is half what we inherited.’
UK House Price Growth Cools by Less-than-Expected, Pound (GBP) Fluctuates.
The Pound Sterling to Euro (GBP/EUR) exchange rate fluctuated a little as Thursday’s European session got underway and the UK published House Price data for November.
While the data showed that house price growth slowed, the pace eased by less-than-expected.
Values were up 8.2% on the year, down from 8.8% the previous month but bettering forecasts for annual growth of 8.0%, and prices climbed by 0.4% on the month – month-on-month growth of 0.3% had been forecast.
As the data does indicate a cooling in the UK’s property market (a circumstance which would give the Bank of England (BoE) more leeway for leaving interest rates on hold) the report knocked the Pound a little. However, as the results beat forecasts, GBP/EUR declines were limited.
Halifax said of the data; ‘Receding buyer interest combined with a revival in private housing completions has brought supply and demand into better balance. [We expect a] further moderation in house price growth over the next year’
Euro (EUR) Supported by Improved Construction/Retail PMI.
As the European session progressed, the Euro managed to claw back some of its recent losses against the Pound thanks to improvements in Germany’s Construction PMI and both Germany and the Eurozone’s Retail PMI.
The measure of the German construction sector advanced from 51.5 to 53.5 in November, pushing further above the 50 mark separating growth from contraction, and the nation’s retail PMI climbed from 50.2 to 52.8.
The retail PMI for the Eurozone as a whole increased from 47.0 to 48.9.
The German report prompted this response from Markit economist Oliver Kolodseike; ‘Germany’s retail PMI rose to a five-month high in November, as promotional offers and advertising campaigns boosted sales. While gross profits continued to decline, there are signs that this may change in coming months, as wholesale price inflation fell to its lowest level in over four-and-a-half years amid reports of lower prices for foodstuff.’
After the Eurozone’s figures were published the Pound Sterling to Euro (GBP/EUR) exchange rate shed 0.2% to trade in the region of 1.2720.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast.
In the hours ahead the direction taken by the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to be dictated by the European Central Bank’s (ECB) interest rate decision.
Any reference to full-scale quantitative easing could cause Euro depreciation.
The Bank of England’s (BoE) policy meeting will also be of interest, but given the fact that the central bank is unlikely to make any alterations to fiscal policy, Pound movement may be limited.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.2435,
Euro,,Canadian Dollar,1.4140,
Euro,,Pound,0.7916,
Euro,,Australian Dollar,1.4789,
US Dollar,,Euro,0.8043,
Canadian Dollar,,Euro,0.7072,
Pound Sterling,,Euro,1.2633,
Australian Dollar,,Euro,0.6761,
[/table]
