While both the Euro to Pound (EUR/GBP) and EUR/USD exchange rates were little changed after European Central Bank President Mario Draghi delivered a dovish testimony yesterday, the Euro dropped against all of its rivals on Tuesday.
The Common Currency came under intensive pressure following the publication of ZEW Economic Sentiment Surveys for both the Eurozone and its largest economy, Germany.
The ZEW Economic Sentiment survey for the 18-nation currency bloc dropped from 58.4 to 48.1 in July.
Germany’s measure of Economic Sentiment slid from 29.8 to 27.1, worse than the decline to 28.2 anticipated by economists.
Finally, instead of producing a reading of 67.4 (as forecast) the ZEW Current Situation measure for Germany plunged from 67.7 to 61.8.
In the words of the ZEW President, Professor Clemens Fuest, ‘Germany has experienced a slight dent in economic activity recently – retail sales declined and industrial production as well as incoming orders dropped. The current decrease of the ZEW Indicator of Economic Sentiment reflects this sobering development. On a general note, however, the medium-term economic outlook remains favourable.’
These reports marked a seventh month of declining investor confidence and were reflective of local and geopolitical concerns.
German data has been patchy of late and there are fears that a prolonged period of low inflation in the Eurozone, coupled with poor performances in nations like France, could be weighing on the European superpower.
According to German economist Stefan Schneider; ‘There’s even a chance that the economy stagnated in the second quarter, and an escalation in the Middle East would of course affect Germany. But such an escalation is an unlikely scenario and generally speaking, the German economy is still solid.’
The Euro to Pound (EUR/GBP) exchange rate shed over 0.4% after the reports were published.
The Common Currency also came under pressure against the Pound as the British asset was supported by a surprisingly upbeat UK inflation report.
With the data showing that the annual pace of UK inflation climbed closer towards the Bank of England’s 2% target in June Sterling broadly strengthened.
The EUR/USD exchange rate dipped by 0.2% over the course of the European session.
Later today further movement in the EUR/USD exchange rate could be caused by the US Advance Retail Sales figure. The report is expected to detail a 0.6% month-on-month climb in sales.
Of course, Federal Reserve Chairwoman Janet Yellen is also due to deliver her testimony to the senate before the close of trading.
If she strikes a dovish tone the US Dollar could suffer.
Tomorrow movement in the Euro to Pound (EUR/GBP) exchange rate will most likely be caused by the UK’s employment data and the Eurozone’s trade balance figures.
UPDATED 09:15 GMT 16 July, 2014
Euro to Pound Steadies before Employment Figures
During Tuesday’s European session the Euro to Pound (EUR/GBP) exchange rate surged as investors digested some concerning confidence reports from the Eurozone.
The fact that the rate of inflation in the UK climbed to 1.9% in June – taking it to within touching distance of the Bank of England’s 2% target – upped the odds of an interest rate increase taking place this year and bolstered the Pound, causing the EUR/GBP pairing to soften further.
As trading began on Wednesday the Euro to Pound exchange rate was little-changed from yesterday’s closing levels.
While investors will be taking an interest in the Eurozone’s Trade Balance report, currency market volatility is more likely to be inspired by the UK’s employment figures.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.7931,
Euro,,US Dollar,1.3592,
Euro,,Canadian Dollar,1.4606,
Euro,,Australian Dollar,1.4516,
Euro,,New Zealand Dollar,1.5452,
US Dollar,,Euro ,0.7357,
Pound Sterling,,Euro,1.2605,
Canadian Dollar,,Euro,0.6848,
Australian Dollar,,Euro,0.6887,
New Zealand Dollar,,Euro,0.6465,
[/table]
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