EUR GBP Exchange Rate Dips despite Upbeat Eurozone Data

October 31, 2017 - Written by John Cameron

STORY LINK EUR GBP Exchange Rate Dips despite Upbeat Eurozone Data

The Euro Pound (EUR GBP) exchange rate has slipped today as markets appeared to be largely nonplussed by some upbeat economic data from the Eurozone today.

Euro (EUR) Dips as Upbeat Data Fails to Boost Sentiment

The Euro has slipped against the Pound today despite the release of some impressive data from the Eurozone.

Most impressive of the data released today was the Eurozone’s latest employment figures as they revealed that the jobless rate fell to 8.9% in September, beating expectations it would have held at 9% and reaching its lowest levels since the start of 2009.

On top of this the Eurozone also showed some robust economic growth in the third quarter it grew 0.6%, with the previous quarter’s GDP being revised up to 0.7%.

The jump also prompted year-on-year growth to rise to 2.5%, leading some analysts to suggest that the Eurozone could outpace US growth this year.

However undermining the upbeat GDP and unemployment figures was the release of the Eurozone’s latest core inflation report, with revealed that underlying inflation slowed unexpectedly in October.

This will be seen as vindication for the European Central Bank (ECB) who signalled last week that it was unlikely to raise interest rates for the foreseeable future as it announced a very dovish wind down to its quantitative easing programme.
Jennifer McKeown of Capital Economics said;

‘The ECB will have been particularly disappointed to see that core inflation dipped from 1.1pc to a five-month low of 0.9pc, With the economic recovery continuing apace, the Bank will still be keen to reduce its policy support. But it will continue to do so very slowly, with asset purchases likely to continue for the whole of next year and interest rates unlikely to rise until well into 2019.’

Pound (GBP) Strengthens as Markets Await BoE Rate Decision

Sterling meanwhile remains in a position of strength this today in advance of the Bank of England’s latest rate decision later this week.

The BoE’s Monetary Policy Committee (MPC) is widely expected to vote raise interest rates when they meet on November, the bank’s first rate hike in just under a decade.

However even two days out from the decision a November rate hike is not quite seen as a dead cert as a number of analysts have expresses doubts over whether the BoE will seek to raise rates at a time when UK consumers are coming under increasing pressure from both weak wage growth and soaring inflation.

With much of Sterling’s recent strength being driven by BoE rate hike speculation the choice to leave rates on hold could be disastrous for the Pound.

ING’s currency strategist Viraj Patel said;

‘It will be a major, major surprise if the Bank didn’t hike interest rates on Thursday. It would certainly be catastrophic for sterling, because speculation of that rate hike has provided a floor for sterling and stopped it from sliding lower ... You take away that support and it’s like pulling the rug out from under sterling’s feet.’

EUR GBP Exchange Rate Forecast: UK Manufacturing Growth to Slow?

Looking ahead the EUR GBP exchange rate may manage to recoup some of today’s losses on Wednesday with the release of the UK’s latest Manufacturing PMI, with economists forecasting that factory activity in Britain will have slowed slightly in October.

The Euro may be able to further press its advantages on Thursday morning as should Germany’s October employment report be as upbeat as the Eurozone figures released earlier today.

However any gains for the single currency are of course likely to be temporary in advance of the BoE rate decision on Thursday afternoon, with an expected rate hike likely to bolster Sterling.

Current Interbank Exchange Rates

At the time of writing the EUR GBP exchange rate was trending around 0.8790 and the GBP EUR exchange rate was trending around 1.1372.

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TAGS: Euro Pound Forecasts