The euro fell against the pound yesterday as the latter crossed a pivotal level- the pound to euro rate passed the 1.18 level, thanks to some favourable statistics coming out of the UK. The euro to dollar rate held steady following the release of the French business climate report, which came after little movement from the single currency after the release of encouraging German data earlier this week. At the time of writing, the euro is .843669 against the pound and 1.10906 against the dollar.
European Central Bank Decision on Rates Due
The European Central Bank’s (ECB) interest rate decision is due later today, and investors in the euro are cautious. Any more indications of weakness in the eurozone could dampen the bank’s outlook for the future and reduce the value of the single currency. We are also expecting the publication of the flash consumer confidence statistics for the eurozone in January, slated to ease by -7.8.
Investors are not expecting major policy changes to the ECB, but are expecting a formal launch of a broad strategic review from European Central Bank President Christine Lagarde this week. This will look at whether the 2% inflation target is valid given the change in the global economy, with the last strategic review taking place back in 2003. The review will also look at whether inflation, interest rates and economic growth are lower than policymakers expect.
Sterling Has Best Day yet in 2020
The pound reacted better to the latest business optimism statistics compared to the euro and Germany’s latest statistics. The Confederation of British Industry (CBI), the trade association representing businesses in the UK, published its Industrial Trends report for January which showed that Business Optimism hit 23, compared to being at -44 like previously. Business confidence in the UK has soared since Boris Johnson’s huge win in December’s general election.
On Friday we’ll see the release of the flash PMI survey, which will give a good indication of the UK’s post-election economic performance. Investors fear that the Bank of England’s Monetary Policy Committee could reduce interest rates, with several members hinting that they could vote to lower them at the end of January. The MPC have implied that they will base much of their decision on the flash PMI numbers.
The foreign exchange market seems to have largely ignored Brexit so far in 2020, with concerns around interest rates in both the UK and the EU contributing to currency fluctuations.
For more GBP/EUR news or if you have a currency requirement you can get in touch with me, Tom Holian, directly at email@example.com, or call +44 (0) 1494 360 899 to discuss these factors in more detail.