Euro (EUR) Conversion Rate Climbs against the Pound Sterling (GBP) despite Poor European Data Results
The Euro to Pound Sterling (EUR/GBP) exchange rate advanced by around 0.4% on Friday afternoon.
Although European economic data produced mostly disappointing results on Friday, the single currency gained versus many of its currency rivals. The appreciation can be linked to demand for safe-haven assets amid fears regarding China’s economic struggles. However, several analysts (including those from BNP Paribas) predict Euro depreciation to come as the European Central Bank (ECB) highlights fears regarding Euro overvaluation.
One particularly disappointing European data publication on Friday was the German Construction PMI for August which came in at 50.3, only fractionally above the level which separates growth from contraction. Oliver Kolodseike, economist at Markit said: ‘Germany’s construction sector stutters ahead in August, with the headline PMI indicative of a near stagnation in building output. The marginal increase in overall construction output was attributed to fractional growth in work on residential and commercial building projects, while civil engineering activity contracted at the fastest pace in almost a year. Moreover, companies noted a lack of incoming new business and reported pessimism towards the 12-month outlook for activity. Overall, the survey data sit in stark contrast to accelerated growth in both the manufacturing and service sectors.’
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7316.
Pound Sterling (GBP) Exchange Rate Forecast to Hold Losses against the Euro (EUR) on Poor UK PMIs
Over the past week British data has produced mostly disappointing results. This caused the Pound to slump versus its major peers on Friday despite the solitary UK data publication printing positively. It is worth noting that August’s New Car Registrations data is not particularly impactful in terms of its economic weighting.
The Pound’s depreciation on Friday is mostly the result of traders digesting a disappointing set of PMIs. The Construction, Manufacturing, Services and Composite PMIs all failed to meet with expected growth. This caused concern amongst traders who fear long delays to a Bank of England (BoE) benchmark rate hike.
The Euro to Pound Sterling (EUR/GBP) exchange rate dropped to a low of 0.7282 during Friday’s European session.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Predicted to Decline on Euro Overvaluation
Over the coming week there will be several influential economic data publications with the potential to provoke changes for the Euro to Pound Sterling (EUR/GBP) exchange rate. In terms of British data the Bank of England Inflation Forecast for the next 12 months will be of most importance. Eurozone second-quarter Gross Domestic Product will be the European publication most likely to initiate changes for the common currency.
However, with many analysts predicting the European Central Bank (ECB) will remain dovish in the face of Euro overvaluation, there is a high likelihood that the Euro to Pound Sterling exchange rate will soften irrespective of domestic data publications.
The Euro to Pound Sterling (EUR/GBP) exchange rate climbed to a high of 0.7334 during Friday’s European session.
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