Euro Rate Today - EUR to GBP Exchange Rate Bearish as Latest ECB Measures Fall Short of Forecasts

September 20, 2014 - Written by Toni Johnson

STORY LINK Euro Rate Today - EUR to GBP Exchange Rate Bearish as Latest ECB Measures Fall Short of Forecasts

Euro Rate Today: The Euro to Pound trended lower on the exchange rate markets last Friday in the aftermath of the Scottish referendum result.

The Pound Sterling (GBP) saw gains early on Friday when the ‘No’ camp was announced as the winner of the vote.

Conversely, the Euro (EUR) has softened against other majors on the news that the latest ECB stimulus measures have flopped.

Euro Rate Today: EUR Lower as Eurozone Sees Tough Times Ahead

The European Central Bank’s (ECB) latest attempt to kick-start the Eurozone recovery into action has met disappointment already.

Last week ECB President Mario Draghi stated that the central bank planned to cut interest rates, and supply cheap money to banks to encourage lending.

However, despite economists forecasting big money demand from Euro area banks (up to 400 billion Euros), the actual figure disappointed at only 82.6 billion Euros. Economist Holger Schmieding commented: ‘Simply offering more liquidity at more generous terms to banks awash in cash will not make a huge difference to the outlook for growth and inflation.’

However, this general consensus that the latest stimulus measure has flopped has been counteracted by ECB board member Peter Praet who suggests that the first round of results shouldn’t be examined too closely, and that it ‘will have a sizeable impact’ on the ECB’s balance sheet.

The Eurozone recovery has been stagnating lately and it seems the ECB is running out of viable options to revive the recovery before undertaking quantitative easing (QE) which many economists speculate to be the next step.

One trader commented: ‘Logic should say [the response] should be slightly bearish on the periphery, especially the front end of the market, but the reaction seems to be very muted. The weaker it is the more chance you get of substantial QE down the line so I think the market is weighing up the short-term against the long term [outlook] at the moment.’

Forecast for the EUR/GBP Conversion

Monday will see Italian Industrial Orders and Eurozone Consumer Confidence figures which may influence the Euro slightly.

More influential, however, will be the release of Several Markit German and Eurozone Purchasing Manager Indexes which will measure Composite, Manufacturing, and Services levels on Tuesday.

Conversely, the Pound will feel the effects of Loans for House Purchase, Public Finances and Public Sector Net Borrowing numbers on Tuesday in what promises to be the start of a quiet domestic data week for Sterling.

Euro to Pound (EUR/GBP) Exchange Rate Softening; Italian Industrial Figures Fall

The Euro has softened against the Pound, and continues to remain bearish into the start of this week.

The Euro is likely to remain volatile for some time as the European Central Bank enforces new measures in an attempt to revive the Eurozone’s economy. Italian Industrial Orders contracted in July on the year by 1.0%, whilst Industrial Sales also fell by 0.7% in July on a yearly basis.

The UK will see a quiet week ahead data-wise, which will leave the Pound responding to global developments.

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