Shortly after European trading began on Tuesday the Euro to GBP exchange rate slipped to a low of 0.7923 as the ‘Common Currency’ faltered in the face of mixed German trade data.
Although Germany’s trade surplus widened, the fact that both exports and imports fell by considerably more-than-forecast was a further indication that outside pressures are affecting the performance of the Eurozone’s largest economy.
Yesterday a German Industrial Production report registered an unexpected decline.
According to industry expert Allen Mattich; ‘because imports fell by more than exports, the German outcome is bad news for its neighbours as well. Germany’s huge balance of payments surpluses, which have been running at more than 7% of GDP, were one of the root causes of the Eurozone crisis.’
However, the Euro went on to recover ground against Sterling as the British asset was weakened by the news that Manufacturing Production and Industrial Production in the UK both declined on a month-on-month basis rather than registering the gains anticipated by economists.
As the Bank of England is due to meet later this week, this sign of weakness in the UK economy has undermined rate-hike bets and pushed the Pound lower.
The Euro to Pound exchange rate also benefited from a report issued by the British Chambers of Commerce (BCC).
The institution published data which argued that if the Bank of England is too quick in raising the benchmark interest rate, business confidence (and the economic recovery as a whole) could be undermined.
The Euro to GBP exchange rate achieved a high of 0.7960.
EUR/USD exchange rate movement also occurred, with the pairing slipping by 0.1% prior to the release of US JOLTs Job Openings and Consumer Credit reports.
In its quarterly economic survey, the BCC observed that 18% of manufacturing companies are worried about the direction borrowing costs might take. This result was up from the 16% recorded in the first quarter of the year.
BCC Director General John Longworth was quoted as saying; ‘These results reinforce the case against the Bank of England making any hasty decisions on raising interest rates in the very short-term. By giving up the cost of credit for fast-growing firms, many of whom do not sit on the same healthy cash piles as their more established counterparts, early rate rises may mean more limited growth ambitions.’
Meanwhile, an Executive Board Member of the European Central Bank asserted that quantitative easing measures (which have been threatened by the ECB at its last two meetings) should only be adopted as a last resort.
Sabine Lautenschlaeger asserted; ‘While such measures are in general part of the toolkit, the prerequisites for such a monetary-policy measure must be particularly high as the side effects are especially significant. Only in a real emergency situation, for example in the case of an imminent deflation, could in my view such an instrument be considered. Those risks are neither visible, nor do we expect them.’
Modest EUR/USD volatility could occur in the North American session depending on how the US reports print.
Tomorrow Euro to GBP exchange rate movement could be triggered by the British Retail Consortium’s Shop Price Index. Investors will also be looking ahead to the publication of the ECB’s Monthly Report and the BoE rate decision, both taking place on Thursday.
UPDATED 22:15 GMT 08 July, 2014
Euro to GBP Exchange Rate Holding Steady before BoE
As the European session closed on Tuesday the Euro to GBP exchange rate was little-moved after shedding earlier gains.
The Euro had briefly advanced on the Pound in response to the UK’s disappointing Manufacturing and Industrial Production reports, but as investors bet that this data doesn’t herald a setback for the UK’s economic recovery Sterling weakness didn’t last for long.
In the words of currency strategist Valentin Marinov; ‘We doubt that the latest disappointing data heralds the beginning of sustained growth deceleration in the U.K. Recent sentiment indicators seem to suggest that the recovery remains very robust. We remain bullish.’
The Euro to GBP exchange rate also fell from earlier highs after the UK’s GDP estimate for June came in at 0.9%.
UPDATED: 10:00 GMT 10 July, 2014
EUR/GBP Exchange Rate boosted by UK Deficit News
After the UK’s Trade Balance data showed that the nation’s deficit had widened to its largest for several months, the appeal of the Pound was quashed and the Euro to GBP exchange rate was able to advance.
The EUR/GBP pairing climbed by 0.15% in the immediate aftermath of the data publication.
The Euro was little affected by the release of the European Central Bank’s monthly report as it merely reiterated previous commentary from the central bank.
As the odds of the Bank of England changing policy at today’s meeting are extremely slim, the Euro to GBP exchange rate could hold gains until tomorrow.
The EUR/USD pairing was trending in a slightly stronger position thanks to the Federal Open Market Committee’s dull meeting minutes.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.7944,
Euro,,US Dollar,1.3589,
Euro,,Canadian Dollar,1.4512,
Euro,,Australian Dollar,1.4474,
Euro,,New Zealand Dollar,1.5475,
US Dollar,,Euro ,0.7357,
Pound Sterling,,Euro,1.2589,
Canadian Dollar,,Euro,0.6888,
Australian Dollar,,Euro,0.6907,
New Zealand Dollar,,Euro,0.6463,
[/table]
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