ECB Jitters Weigh on Euro, GBP EUR Exchange Rate Fluctuates

October 13, 2016 - Written by James Fuller

STORY LINK ECB Jitters Weigh on Euro, GBP EUR Exchange Rate Fluctuates

The Pound to Euro exchange rate has trended limply for most of the week so far, as market fears of a ‘hard Brexit’ leave Sterling weak despite mixed demand for the Euro. The shared currency has been weakened by a strong US Dollar and central bank jitters ahead of next week’s ECB meeting.

GBP/EUR has ultimately remained close to the week’s opening levels of 1.1102 since markets opened on Monday. The pair briefly hit a new seven-year-low of 1.0958 on Tuesday night, but has since recovered slightly and now fluctuates below the key level of 1.11.

GBP EUR Trends Weakly as Currency Value Hits High Street

Sterling trade finally appears to have had a direct effect on the average UK citizen this week, as Thursday saw a row emerge between UK supermarket Tesco and food brand supplier Unilever.

Unilever, as a company supplying many household brand names such as Marmite and PG Tips to British shelves, is based outside of Britain. As a result, the Pound’s drop in value since the EU Referendum has had a direct effect on the company’s imports and exports.

Tesco appears to have removed many of these brands from shelves in order to avoid upping their prices, causing outrage among some consumers.

In other news, ‘hard Brexit’ concerns kept Sterling from advancing while Thursday’s UK house price balance report from RICS failed to give GBP a boost.

Euro (EUR) Limp on Strong Dollar and ECB Jitters

The US Dollar has been a thorn in the Euro’s side this week, as the bullish ‘Greenback’ has surged every day, undermining the value of its rival, the Euro, despite generally optimistic Eurozone data.

Heating up speculation on the European Central Bank’s (ECB) future actions have also kept the shared currency at bay, with the ECB’s next policy meeting to be held next week.

Markets have speculated that the ECB will be winding down its quantitative easing measures and returning to more normalised monetary policy. These rumours have persisted despite comments from ECB officials denying them.

Thursday saw the publication of Germany’s final September Consumer Price Index (CPI) score, which met preliminary figures of 0.7% year-on-year.

Pound Euro Exchange Rate Forecast: Sustained Sterling Recovery Unlikely

Despite jitters among Euro traders over next week’s European Central Bank (ECB) meeting, the Pound to Euro exchange rate is unlikely to mount a significant recovery as demand for the Brexit-worn Pound is simply too low.

This week’s low-influence data has had no real effect on Sterling trade. Investors may instead be waiting for next week’s UK ecostats, which include September’s inflation results.

Next week will also of course see the ECB’s October policy meeting. Speculation has flared up recently that the ECB will begin to wind down its quantitative easing policy. If the ECB really indicates that this could happen in next week’s meeting, the shared currency will soar in response.

Until then, trade between the Pound and Euro could remain relatively flat, with ‘hard Brexit’ concerns weighing on Sterling and a strong US Dollar weighing on the Euro.

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