Both the Euro to Pound (EUR/GBP) and Euro to US Dollar (EUR/USD) exchange rates were trending higher on Thursday following the European Central Bank’s interest rate decision.
While the US Dollar was broadly softer as a result of concerns that its recent rally had been excessive, the Pound also posted widespread losses in reaction to comments issued by a Bank of England policymaker.
Speculation that the US Dollar had strengthened too rapidly caused the ‘Greenback’ to decline and helped the Euro get the upper hand even as the Eurozone’s Producer Price Index registered a steeper-than-forecast annual drop.
Meanwhile, BoE policymaker Ben Broadbent undermined demand for the Pound by insinuating that the UK economy isn’t yet robust enough to handle an interest-rate increase. Sterling lost ground against almost all of its currency counterparts even as the UK’s Construction PMI came in above expected levels.
The Euro to Pound Sterling (EUR/GBP) exchange rate hit a high of 0.7844
As expected by economists, the European Central Bank left interest rates unchanged.
In the policy statement following the ECB decision, President Mario Draghi asserted that the central bank will begin purchasing asset-backed securities before the end of the year.
Although more details relating to the measures have yet to be announced, the Euro extended its advance against the Pound and held gains against the US Dollar in the immediate aftermath of the decision.
According to economist Nick Matthews; ‘No change but the focus for this meeting is not on interest rates but on the purchase programmes. Markets will be looking for all the details, particularly the minimum ratings for covered bonds and ABS’
The EUR/USD pairing hit a low of 1.2612
The Euro to US Dollar exchange rate held its own even as the US published better-than-expected Initial Jobless and Continuing Claims figures.
Initial jobless claims fell from a negatively revised 295,000 to 287,000 in the week ending September 27th, beating expectations for 297,000.
Continuing Claims also slid from 2443,000 to 2398,000.
EUR/GBP, EUR/USD Exchange Rate Forecast
Tomorrow the Euro to Pound (EUR/GBP) exchange rate could be affected by final Services/Composite PMI for the Eurozone and its largest economies as well as UK Markit Services/Composite PMI. Investors will also be taking a keen interest in the Eurozone’s retail sales report. Economists are predicting a sales gain of 0.1% in August on a month-on-month basis following July’s -0.4% decline. If the data disappoints the Euro could pare some of today’s gains.
The Euro to US Dollar (EUR/USD) exchange rate will react to the Eurozone’s data, but the US Non-Farm Payrolls report has the potential to be more influential. The US economy is believed to have added 218,000 positions in September, with the nation’s unemployment rate holding at 6.1%. As the Federal Reserve’s timeline for increasing interest rates directly correlates to the level of slack in the US labour market, upbeat figures would bolster the US Dollar.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7838
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2661
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.7840,
Euro,,US Dollar,1.2660,
Euro,,Canadian Dollar,1.4104,
Euro,,Australian Dollar,1.4418,
Euro,,New Zealand Dollar,1.6064,
US Dollar,,Euro ,0.7906,
Pound Sterling,,Euro,1.2755,
Canadian Dollar,,Euro,0.7083,
Australian Dollar,,Euro,0.6944,
New Zealand Dollar,,Euro,0.6226,
[/table]
