Although investors remain concerned over the implications of the Volkswagen emissions scandal and the impact this could have upon the wider German economy, the GBP/EUR conversion rate has returned to a downtrend this afternoon.
IFO Surveys Shored up Single Currency (EUR) as GBP/EUR Pairing Remained Weighed Down by Unimpressive UK Data
Despite German Consumer Confidence having fallen further than forecast to 9.6, as opposed to 9.8, the single currency (EUR) remained on bullish form early on Thursday. In part this was due to the support of the IFO Business Climate and Expectations surveys, which both printed at higher levels than had been expected. Suggesting that faith in the Eurozone’s prime economy is once more on the rise this saw the Euro climb across the board, the prospect of monetary loosening measures from the European Central Bank (ECB) seemingly put to rest.
Conversely, the UK’s BBA Loans for House Purchase figure for August was revealed to have grown at a slower rate than pundits had anticipated, rising to 46,743 rather than 47,000. Leaving traders unenthused, this kept the Pound (GBP) in a slump, with the GBP/EUR exchange rate sinking to a four-month low of 1.3504.
Pound (GBP) Sluggish as Bank of England (BoE) Interest Rate Hike Hopes Stall Further, Euro (EUR) Undeterred by Volkswagen Turmoil
The bearishness of the Euro began to wear thin, however, as the Volkswagen emissions scandal has continued to spread and develop, pulling in other manufacturers and holding a question mark over one of Germany’s major industrial pillars. With the extent of the deceit still to be established, as well as the level of impact the resultant legal action will have on the company, it seems likely that the longer-term outlook of the Eurozone’s powerhouse is now decidedly less optimistic than it had been. Nevertheless, it was not long before this latest negative influence was also shrugged off by the optimistic common currency.
Dovish words from Monetary Policy Committee (MPC) member Ben Broadbent did little to help Sterling or the GBP/EUR conversion rate today. Broadbent not only indicated that he saw no justification for raising interest rates in the imminent future but also that the more likely beginning to monetary tightening would be in the third quarter of 2016. Severely dampening hopes of a Bank of England (BoE) rate hike this generally pessimistic atmosphere and recent weak data left the GBP/EUR pairing down after briefly rallying this morning.
GBP/EUR Exchange Rate Forecast: Euro Could Remain Dominant with Improving German and Eurozone Inflationary Outlook
Movement may be more volatile on the pairing next week, with a number of major data releases coming from both the UK and the Eurozone. German figures will likely be driving the common currency with the nation’s September Consumer Price Index and unemployment data set to shore up the Euro, particularly if indicators point to an improvement in the inflationary outlook. Likewise the Eurozone CPI will also prove influential, as any evidence of progress towards the ECB’s 2% inflation target stands to further strengthen the case against the introduction of fresh monetary stimulus.
Sterling’s hopes for a rally may rest with the latest UK Manufacturing and Construction PMIs, as any stronger signs of recovery in the domestic economy could reignite suggestions of a sooner BoE take-off on interest rates. Continued weakness on upcoming figures, however, could push the GBP/EUR conversion rate into a renewed slump.
Current GBP, EUR Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate is ceding ground at 1.3583, with the Euro to Pound Sterling (EUR/GBP) pairing climbing once again in the range of 0.7361.
Comments are closed.