The Euro to Pound (EUR/GBP) exchange rate rallied considerably on Monday after softening last week in response to the European Central Bank’s decision to cut interest rates further and introduce additional stimulus.
After the ECB announcement the Euro plummeted against the majority of its currency counterparts, but the common currency was able to fight back against its British rival on Monday as the appeal of the Pound was squashed by a surprising YouGov poll.
The poll showed that a higher percentage of participants voted in favour of Scotland leaving the UK than voted in favour of the union continuing.
The 51% to 49% result blind sighted UK politicians ahead of next week’s vote and pushed the Pound lower against a range of rivals, including the US Dollar, Euro and Australian Dollar.
Sterling slumped to its lowest level against the US Dollar for the year so far.
In the opinion of strategist Nick Stamenkovic; ‘The referendum is on a knife edge. Markets have been too complacent but are now waking up to the increased risk of Scotland voting for independence.’
The Euro to GBP exchange rate was also trending in a stronger position thanks to Germany’s better-than-forecast trade data.
An unexpectedly strong jump in exports and a slide in imports resulted in the Eurozone’s largest economy recording a trade surplus of 22.2 billion Euros.
The report saw economist Carsten Brzeski note; ‘It looks like demand from US and UK is more than offsetting any weakness from German exports to Russia so these fears that German exports would go down the drain were clearly exaggerated.’
The Euro to GBP exchange rate hit a high of 0.8040.
It wasn’t all good news for the Eurozone today however as the region’s Sentix Investor Confidence gauge was published.
In August the measure came in at 2.7 and economists had forecast a reading of 1.4 in September. However, the sentiment index actually dropped to -9.8.
In a statement released with the data Sentix analyst Sebastian Wanke noted; ‘this constellation signals a renewed recession for the Eurozone. [The report] is all the more noteworthy as during Mr Draghi’s presidency the ECB has managed on several occasions to turn round investors’ economic expectations. Now, this does not seem to work.’
The EUR to USD pairing hit a low of 1.2949.
The EUR to USD exchange rate fluctuated before steadying to trade in the region of 1.2944.
Later today the US Consumer Credit report might inspire some movement in the Euro to US Dollar exchange rate.
EUR/GBP, EUR/USD Exchange Rate Forecast
The Euro is likely to maintain its stronger position against the Pound for the rest of the day.
As the week progresses there are several economic reports with the potential to trigger Euro to Pound and Euro to US Dollar exchange rate movement.
On Tuesday the UK’s trade balance, growth and industrial/manufacturing production reports are likely to drive EUR/GBP movement, but on Thursday Germany will be in the spotlight again as the nation releases its Consumer Price Index for August.
Stagnating or slowing consumer price gains would pile pressure on the Euro and could help the Pound strengthen.
The Eurozone’s employment figures, the US monthly budget statement and the nation’s advance retail sales report will be the main drivers of EUR/USD exchange rate movement in the latter half of the week.
UPDATE
The Euro to Pound Sterling exchange rate is currently trending in the region of 0.7996.
The Euro to US Dollar exchange rate is currently trending in the region of 1.2884.
UK economic data on Tuesday morning has churned out some mixed results, although the effect has been minimal with investor focus dominated by the Scottish referendum. Both Manufacturing and Industrial production printed positively; the former hitting the forecast and the latter exceeding it. Total Trade Balance, however, failed to meet with the forecast figure of -2.459 billion with the actual figure at -3.348 billion.
The Euro has lost significant ground against the Euro as investors speculate on an interest rate hike in the near-future. In general the last month has seen positive results from US labour market data, and the Federal Reserve are under extreme pressure to tighten monetary policy.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.7999,
Euro,,US Dollar,1.3264,
Euro,,Canadian Dollar,1.4561,
Euro,,Australian Dollar,1.4297,
Euro,,New Zealand Dollar,1.5829,
US Dollar,,Euro ,0.7538,
Pound Sterling,,Euro,1.2493,
Canadian Dollar,,Euro,0.6863,
Australian Dollar,,Euro,0.6989,
New Zealand Dollar,,Euro,0.6313,
[/table]
