Pound to Euro exchange rate dips on UK consumer confidence disappointment
On Monday, the Pound to Euro exchange rate opened in the region of €1.1244 and closed down lower around €1.1219.
This deterioration in the value of the Pound was mainly caused by Eurozone economic data, which supported the single currency despite showing mixed results.
The Eurozone ecostats were focused on economic perceptions in July – the most supportive data included higher services sentiment, rising inflation expectations and a slightly better-than-expected economic sentiment reading.
Not all of the data supported EUR/GBP trading, however; business confidence levels fell along with industrial sentiment and consumer confidence levels remained negative.
On the UK side, there was little direct news and GBP/EUR trading was mainly affected by speculation about whether a Bank of England (BoE) interest rate hike was likely this week.
UK Consumer Confidence Drop Causes Pound to Euro (GBP/EUR) Exchange Rate Losses
The Pound (GBP) has made a minor decline against the Euro (EUR) today, falling to a level of €1.1211 on the GBP/EUR exchange rate.
This poor trading comes after the release of worrying UK consumer confidence data, as compiled by statistics company GfK.
July’s reading showed a worsening of UK consumer confidence levels, with a shift from -9 points to -10.
This was a worse-than-forecast result and making matters worse, GfK Client Strategy Director Joe Staton added:
‘Despite the World Cup, Wimbledon and warm weather playing front and centre in the nation’s psyche this July, the barometer again reveals a decline in consumer confidence.
‘The overall index score has now registered at zero or negative since February 2016. Concerns about our personal financial situation, and especially the general economic outlook, have contributed to this long slump.
‘There’s more bad news for retailers too in the form of the Major Purchase Index, which has slipped below zero to reach -2 in July.
‘In the medium-term, and during the uncertainty in the run-up to the UK leaving the European Union in eight months, it is hard to forecast what kind of good news will change the numbers from negative to positive, or indeed where such good news would originate.
‘There’s a heatwave in much of the UK but consumer confidence remains stubbornly sub-zero.
‘In this environment, any bad news such as a surprising uptick in inflation with the expectation of a corresponding increase in interest rates, or any adverse political event either at home or abroad, would likely have an exaggerated downward drag on consumer confidence.’
Euro to Pound (EUR/GBP) Exchange Rate Advances after Eurozone Inflation Rates Rise
The Euro (EUR) has ticked higher against the Pound (GBP) today, hitting a EUR/GBP exchange rate of £0.8923.
This appreciation follows the release of preliminary Eurozone inflation rate figures which suggest a faster pace of annual price growth during July.
July’s flash reading has shown a rise from 2% to 2.1%; for context, inflation at 2% or higher is above the European Central Bank’s (ECB) target and increases pressure on ECB policymakers to act by raising interest rates.
Another supportive factor has been June’s Eurozone unemployment rate figure, which showed that the jobless rate was revised down from 8.4% to 8.3%.
Less helpfully for the single currency, however, GDP growth estimates for Q2 2018 have shown a slowdown compared to the first quarter.
While higher inflation increases the odds of a near-term ECB interest rate hike, slower economic growth could act as a counter and reduce the likelihood of such a decision from the Eurozone central bank.
Pound Sterling to Euro Exchange Rate Forecast: Are Greater GBP/EUR Losses ahead on Eurozone PMIs?
The Pound (GBP) remains at risk of making additional losses against the Euro (EUR) on Wednesday morning, when Eurozone PMI data will be released.
July’s finalised Eurozone manufacturing PMIs are expected to confirm that sector activity rose during the month, which could inspire heavy Euro trading.
On the other side of the equation, the Pound is at risk of falling against the Euro if the morning’s UK manufacturing PMI shows a forecast-matching slowdown.