ECB Decision Leaves GBP EUR Exchange Rate at Weekly High

October 21, 2016 - Written by Tim Boyer

STORY LINK ECB Decision Leaves GBP EUR Exchange Rate at Weekly High

The Pound to Euro exchange rate saw mixed movement on Thursday up until the European Central Bank’s (ECB) meeting. Following the meeting, the Euro weakened as ECB President Draghi indicated a QE extension could be applied in December.

GBP/EUR has trended largely flatly since Tuesday’s session brought the pair up to 1.12. The pair briefly plummeted to 1.1091 on Thursday afternoon, but quickly recovered and now hovers safely above the key 1.12 level.

Pound (GBP) Demand Mixed as Data Fails to Inspire

Sterling has seen mixed sentiment since Tuesday’s surge, as the week’s data has done little to inspire movement. The Pound continued to edge higher against the Euro on Thursday and Friday despite underwhelming UK ecostats.

Thursday saw the publication of British retail sales scores, which came in below expectations in every print but did not seem to have been affected by the Brexit vote in any way.

Friday followed with September’s UK public sector net borrowing report, which once again came in well above expectations and indicated that Britain was still running regular budget deficits. Despite this, Sterling held its ground against the Euro on Friday morning.

Euro (EUR) Slumps after Draghi Hints at December Quantitative Easing

The Euro had a busy day on Thursday despite the European Central Bank (ECB) taking a largely familiar stance to the state of the Eurozone bloc’s monetary policy.

As investors widely expected, policymakers decided to leave its monetary policies frozen and indicated as usual that it would continue its easing measures until March 2017, or beyond if necessary.

It was ECB President Mario Draghi’s following press conference that gave markets a little more to think about and a bit more to trade over as investors pored over Draghi’s every word.

Draghi stated that the bank had not discussed extending quantitative easing in its meeting, which briefly caused the Euro to surge.

However, the Euro quickly gave up its ground as shortly afterwards Draghi stated that the bank had also not discussed tapering the QE program. Hints that an extension to the QE program could be decided in December left the Euro weaker overall on the day.

GBP/EUR Forecast: Eurozone’s Preliminary October PMIs Next Week

It’s already that time again, next week’s session will see the first Eurozone figures for economic activity in October.

Following hot on the heels of the past week’s European Central Bank (ECB) meeting, better economic activity could stave off bets of a December extension to quantitative easing.

September’s Service PMI was highly disappointing due to a big slowing in German services activity, so investors will be hoping for an improvement here. If Composite PMI shows a solid improvement on the month, this could set a good tone for Euro trade next month.

Tuesday will see the publication of the IFO’s October German business sentiment scores, but Britain’s economic calendar will be quiet until Thursday – which sees the publication of Britain’s Q2 Gross Domestic Product (GDP) scores.

While these growth figures may give the Pound a slight boost if they beat expectations, it is becoming increasingly evident that Sterling’s main movement factors revolve around Brexit news now.

As a result, any development in Brexit plans or trade ideas could be the primary cause for Pound movement next week and could help the currency see another week of gains if they impress markets.

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