UPDATE
Given that Bank of England (BoE) officials have expressed concern regarding the lack of inflationary pressure, today’s Consumer Price Index will be of significance. British consumer prices are expected to fall in August which will likely cause the Pound to dive amid speculation of a long delay to a benchmark interest rate hike. The Pound is generally holding steady versus most of its major peers ahead of the key inflation data.
The Euro, meanwhile, is also trading relatively statically versus its major peers as traders await the German ZEW Economic Sentiment survey. With the situation in China weighing on German export growth, many economists’ predict that economic sentiment in Germany will decline.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3648.
Yesterday…
British Pound (GBP) Predicted to Hold Gains against the Common Currency (EUR) on Overdone Sterling Downtrend
The Pound Sterling to Euro (GBP/EUR) exchange rate strengthened by around 0.3% on Monday afternoon.
After Labour’s leader election saw radical left-winger Jeremy Corbyn gain office, the Pound dived versus its major peers. The depreciation was the result of fears that the Euro-sceptic Corbyn will push for an exit from the European Union in the 2017 referendum. With a significant wave of new voters backing Corbyn for his no-nonsense approach to equality, traders also fear that a Labour victory in the next general election will almost guarantee an EU exit.
The Pound recovered losses and edged higher versus many of its major rivals during Monday’s European session, however. This is due to concerns that the Pound’s depreciation was overdone. In addition, Labour’s new foreign affairs spokesman Hilary Benn said that the Labour Party will campaign for the UK to stay a member of the EU no matter what the circumstances. ‘We are going to stay to fight together for a better Europe,’ Benn told BBC radio. ‘We will be campaigning to remain in the European Union.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3639.
Euro (EUR) Forecast to Trend Lower against the UK Pound (GBP) despite Positive Eurozone Data
Despite the fact that Eurozone Industrial Production bettered estimates, the common currency declined versus many of its major peers. On the year, July’s Industrial Production saw output growth of 1.9%, eclipsing expectations of a 0.7% increase in output. On a monthly basis, July’s Eurozone Industrial Production gained by 0.6%; bettering the median market projection of 0.3%. Even China’s economic woes and the resultant demand for safe-haven assets wasn’t enough to provoke a common currency uptrend.
The Euro’s depreciation is mainly the result of speculation that the single currency is significantly overvalued. Having appreciated in response to China’s economic struggles, the Euro’s comparative high value could have a detrimental impact on trade. What’s more, the appreciation has more-or-less wiped out the losses from quantitative easing, boosting concerns that the European Central Bank (ECB) will further expand monetary stimulus in order to devalue the Euro.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3578 during Monday’s European session.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Gains ahead of UK Inflation Data
With an absence of further domestic data publications to provoke changes, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to hold gains for the remainder of Thursday’s European session.
Looking ahead, there will be several influential domestic data reports with the potential to provoke GBP/EUR volatility on Tuesday. The most significant UK data publication will be August’s Consumer Price Index. Bank of England (BoE) policymakers have already highlighted the lack of inflationary pressure as a stumbling block for raising the benchmark interest rate, so higher consumer prices will cause the Pound to rally. For those invested in the Euro, Germany’s ZEW Economic Sentiment Survey has the greatest potential to cause changes.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.3652 during Monday’s European session.
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