The British Pound Sterling hit its best 2014 Euro exchange rate once again today as the EUR took another hit, dropping across the board against all the major currencies. The single currency further weakened on Monday as investors continued to react to the European Central Bank's policy decision to lower its becnmark interest rate last Thursday.
On Tuesday we find the Pound Euro exchange rate is already trading 0.25% per cent higher compared to Monday's close at 1.23931 GBP/EUR. Pound Sterling forecasts have been looking towards the UK Manufacturing and Industrial Production data releases released today.
Euro exchange rate suffers against the Pound Sterling and US Dollar,
Both the Pound to Euro exchange rate and Pound to Dollar exchange rates trended higher over the course of last week and forex forecasts could show more gains to follow. The GBP EUR rate was, as last week drew to a close, a little removed from the 16-month high achieved in the aftermath of the European Central Bank’s rate decision, but was still 0.15 per cent stronger. The GBP USD exchange rate also entered the weekend just shy of the weekly best at 1.6804. The ECB chose to slash interest rates to fresh record lows on Thursday and became the first developed-nation central bank to implement a negative deposit rate. While the financial institution held off from bringing in quantitative easing, it did introduce other measures in an attempt to protect the Eurozone’s timid recovery from the shadow of deflation. ECB President Mario Draghi also hinted that more measures could be introduced. He stated; ‘Are we finished? The answer is no. We aren’t finished here. If need be, within our mandate, we aren’t finished here. Now we are in a completely different world’.
Global Insight economist Howard Archer said of the ECB action; ‘Despite being widely anticipated and in some quarters criticised for occurring too late, it is still a bold and unusual move by the ECB to take its deposit rate into negative territory. There has to be considerable uncertainty as to how effective negative deposit rates will turn out to be.’
The Euro initially slumped in response to the ECB announcement but went on to stage an impressive rebound, recovering from a four-month low against the US Dollar (EUR/USD) as well as strengthening against the Pound (EUR/GBP).
While trade balance figures from the UK and Germany had little impact on the Pound vs the Euro, and left the pairing trading in the region of 1.2314 GBP/EUR, the US non-farm payrolls figure did dictate currency market movement on Friday. The payrolls report showed that the US economy added slightly more positions than expected in May, with payrolls advancing by 217,000 rather than the 215,000 expected. April’s payrolls increase was negatively revised to 282,000, but the US unemployment rate held at 6.3 per cent. According to currency strategist Martin Schwerdtfeger; ‘I think it will take a few days for the market to digest what has come out from the ECB and jobs report, and therefore we could see in the interim some caution and no one wanting to take large bets in any one direction.’
The Pound Sterling (GBP) was trading in a fairly narrow range for much of this week and barely faltered after the Bank of England left interest rates on hold. While the Pound Euro exchange rate did surge in response to the ECB decision, further movement was restrained before the weekend. Over the next five days there are several influential UK reports scheduled for release. UK manufacturing and production figures are out on Tuesday, as is the NIESR GDP estimate for May. This is followed by the UK’s employment data on Wednesday. Last month the UK economy added 283,000 positions and the unemployment rate came in at 6.8 per cent. Another strong result would add fuel to the fire when it comes to a BoE rate increase occurring before next year and could bolster the Pound against its rivals.
There are several economic reports for the Eurozone to be aware of next week. While data like the Eurozone’s Sentix investor confidence index and Italian GDP are unlikely to inspire much currency movement, the French consumer price index, Eurozone industrial production report, German CPI and Eurozone trade figures could have an impact on the Pound to Euro exchange rate. The publication of the minutes from the latest ECB meeting will also be of interest to investors. Further weakness in German inflation could cause additional Euro softness as it may increase bets that the ECB will consider further stimulus measures in the future.
Unless next week’s economic reports for the Eurozone dramatically surprise to the upside, the Pound Euro exchange rate pairing is likely to continue trading above 1.23 GBP EUR and could even touch fresh multi-month highs if the UK employment data impresses.
GBP Historical Exchange Rates - Close 9th June 2014
Yesterday's exchange rates saw the Pound Australian Dollar exchange rate close at 1.79845 GBP/AUD, Pound Canadian Dollar exchange rate close at 1.83257 GBP/CAD, Pound Swiss Franc rate close at 1.50739 GBP/CHF, Pound Euro exchange rate close at 1.23616 GBP/EUR, Pound New Zealand Dollar rate close at 1.97828 GBP/NZD, Pound Turkish Lira rate close at 3.50531 GBP/TRY, Pound US Dollar rate close at 1.68026 GBP/USD, and the Pound South African Rand exchange rate close at 17.88578 GBP/ZAR.