Financial News from the Foremost Currency Group, 21st August 2017
In this week's Report:
GBP/EUR Slides in Spite of Dovish ECB Outlook
Friday’s high: €1.0998
Friday’s low: €1.0926
Euro Capitalises on Persistent Pound Softness
The German producer price index unexpectedly strengthened on the month in July, rising 0.2% after stagnating in June.
This suggested that inflationary pressure within the Eurozone’s powerhouse economy is building to some degree.
Even so, the likelihood of any imminent change in monetary policy from the European Central Bank (ECB) still looks unlikely.
With markets still disappointed by the more dovish nature of the ECB’s July meeting minutes, the upside potential of the Euro remained a little limited ahead of the weekend.
However, this was not enough to keep the GBP/EUR exchange rate on a stronger footing.
Confidence in the Pound was also muted thanks to worries over the outlook of the UK economy and the continuing squeeze on household finances.
As economic momentum appears to be showing signs of slowing the appeal of Sterling has diminished, especially as speculation over the potential outcome of Brexit negotiations continues.
Increasing market scepticism over the abilities of the Trump administration – and consequent weakening of the US Dollar – also helped to boost the appeal of the Euro.
Euro Outlook: Improved Economic Sentiment Could Offer Boost
This morning’s UK public sector net borrowing data could offer the GBP/EUR exchange rate a rallying point.
If new government debt shows a smaller uptick in July this may offer some support to the bearish Pound.
However, if the budget deficit is found to have widened further this could give markets fresh reason to sell out of Sterling.
With the UK looking increasingly vulnerable to any deterioration in trade conditions, a weaker showing here could see the GBP/EUR exchange rate extending its slump further.
Any developments in the government’s approach to Brexit could also provoke volatility for the pairing.
Demand for the Euro, on the other hand, could pick up if tomorrow’s ZEW economic sentiment surveys point towards greater resilience within the currency union.
If confidence failed to pick up further in August, though, this could dent the single currency and give the ECB more reason to remain on hold.
09:30 UK Public Sector Net Borrowing
10:00 German ZEW Economic Sentiment Survey
10:00 Eurozone ZEW Economic Sentiment Survey
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