Dovish UK Consumer Confidence Dents Pound (GBP) as Common Currency (EUR) takes Downturn on German Data Shortfalls
Although UK Consumer Confidence fell short of expectations overnight, clocking in at 3 instead of 5, the GBP/EUR pairing has benefitted from the softening of the Euro (EUR) this morning. Following the severe disappointment of yesterday’s German CPI, which suggested a return to deflation for the Eurozone’s major economy, the single currency has been weighed down further by the release of declining German Retail Sales figures. As such, the GBP/EUR exchange rate was trending in the range of 1.3482.
Earlier…
Although Sterling (GBP) strengthened today on positive UK Mortgage Applications data, the gains of the GBP/EUR currency pair were limited by the release of surprisingly strong Eurozone Confidence figures.
Euro (EUR) Prompted onto Dovish Trend as Influence of Volkswagen Crisis Continued to Spread to Benefit GBP/EUR Pairing
Yesterday saw the Pound (GBP) beginning to recover from the battering it had taken over the last week from a combination of weaker-than-expected data and dovish commentary from Bank of England (BoE) policymakers. Given the relative lack of major economic releases on Monday, the predominant influence on the common currency (EUR) was the continuing scandal surrounding Volkswagen and potentially the wider automobile industry. With admissions from both Audi and Skoda confirming that more cars have been fitted with the so-called ‘defeat device’, the crisis remained a heavy weight on the minds of traders. Nevertheless, the Euro proved robust and pushed the GBP/EUR exchange rate down overnight to a four-month low of 1.3449.
Improved UK Mortgage Applications Buoyed Sterling (GBP) Today, Single Currency (EUR) Rises on Positive Eurozone Confidence Figures
A stronger printing than anticipated on the August UK Mortgage Applications this morning helped to spur Sterling onto another climb, as the figure bettered estimates of a decline to rise from 69,000 to 71,000 on the month. While Net Consumer Credit produced an unexpected decrease, by dropping from 1.2 billion to 0.9 billion, this signal of robust growth within the domestic housing sector led investors to pile back in to the currency. Consequently the GBP/EUR conversion rate surged to 1.3537, taking advantage of the Euro’s weakening from unimpressive German Import Prices.
However, it was ultimately not long before the single currency began to claw back losses as a number of Eurozone Confidence indicators were revealed to have decidedly improved in September. In particular, Economic Confidence gained significantly, rising from 104.1 to 10.5.6 to indicate that sentiment within the currency union was looking up and shaking off the dovish influence of global slowdown concerns. As a result, the GBP/EUR pairing was pushed back into a narrow trend around 1.3504.
GBP/EUR Exchange Rate Forecast: Volatility for Euro Likely on Upcoming German Inflation Data
This afternoon’s German Consumer Price Index data may prove unsupportive for the single currency, with the inflationary indicator expected to show slowed growth across the board. As pressure has begun to mount on the European Central Bank (ECB) with regards to fresh monetary loosening measures, a weak printing could see policymakers prompted towards market intervention. Thursday’s German Unemployment figures could also trigger volatility on the GBP/EUR exchange rate.
As the upcoming UK second quarter Gross Domestic Product figure is merely a finalised number rather than new data, it is unlikely to be of particular note to investors. However, the Pound may yet draw support from the domestic Manufacturing and Construction PMIs due for release towards the end of the week.
Current GBP, EUR Exchange Rates
At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending narrowly at 1.3507, with the Euro to Pound Sterling (EUR/GBP) pairing on a slight downturn in the region of 0.7401.
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