Sterling (GBP) Trading Cautiously ahead of Bank of England (BoE) Rate Decision, GBP/EUR Exchange Rate in Downtrend as Euro (EUR) Strengthens
In spite of the UK’s NIESR Gross Domestic Product Estimate clocking in at the anticipated 0.5% the Pound (GBP) has begun to cede back some of its recently gained ground today ahead of the Bank of England (BoE) Rate Decision and accompanying commentary. While the morning’s German Trade Balance was disappointing, demonstrating a greater narrowing of the national surplus, the Euro has seen a surge in demand. Consequently, the GBP/EUR pairing is presently slumped in the range of 1.3571.
Earlier…
Boosted by a more positive assessment of the UK economy by the International Monetary Fund (IMF), the GBP/EUR exchange rate is making strong gains this morning on the back of expanding domestic Industrial Production.
Uptick in German Construction and Eurozone Retail Kept Euro (EUR) Buoyant, GBP/EUR Down
With limited UK data released on Tuesday the majority of movement in the GBP/EUR exchange rate was driven by the latest Eurozone economic releases. Although the day started off weakly for the single currency (EUR) with German Factory Orders falling markedly short of expectations, the year-on-year figure printing at 1.9% as opposed to 5.6%, the Euro did not particularly soften. Strengthened German Construction and Eurozone Retail PMIs helped to substantially shore up the single currency, easing fears of fresh European Central Bank (ECB) stimulus measures. Counterbalancing recent shortfalls on the currency bloc’s Manufacturing PMIs these figures implied that the effects of the economic slowdown are not as far-reaching as might have been expected. Consequently the GBP/EUR pairing slumped to a daily low of 1.3503.
Sterling (GBP) Benefits from International Monetary Fund (IMF) Growth Report, Single Currency (EUR) Weakens on German Industrial Production Shortfall
A rally was in store for the Pound (GBP), however, after the International Monetary Fund (IMF) negatively revised its forecast for global economic growth. While the IMF issued a caution over the possibility of stagnation should the general recovery remain on its current weak trend, the report also indicated that the UK economy will be the second-fastest grower amongst the G7 nations. This more optimistic assessment, especially when compared to the outlooks of Germany, Italy and France, saw the appeal of Sterling increase.
Wednesday morning brought further support for the Pound, as the UK Industrial Production figure bettered estimates to print at growth of 1.9%. Although this was accompanied by a weaker than hoped performance on the domestic year-on-year Manufacturing Production, which dropped -0.8% rather than the anticipated -0.2%, the GBP/EUR exchange rate still strengthened further. Particularly as German Industrial Production proved disappointing, evidencing a smaller degree of growth than had been expected.
GBP/EUR Exchange Rate Forecast: Bank of England (BoE) Interest Rate Commentary to Provoke Movement for Pairing
Tomorrow’s Bank of England (BoE) Rate Decision will be a cause for volatility, while interest rates are expected to remain unchanged the tone of policymakers’ comments could prompt some significant movement. With the prospect of a rate hike remaining relatively distant, any clarification on the thoughts of members of the Monetary Policy Committee (MPC) would be welcomed by traders at this juncture.
The German Trade Balance, also due for release on Thursday, seems unlikely to provide any particular support for the softened Euro. Forecasts suggest that the national surplus will narrow, and a greater contraction could still be evidenced should the impact of global slowdown fears have been more acute than previously thought.
Current GBP, EUR Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the range of 1.3603, with the Euro to Pound Sterling (EUR/GBP) pairing on a downtrend around 0.7351.
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