GBP/EUR Hits New 8-Year Low Following Draghi’s Jackson Hole Speech
The Pound to Euro exchange rate is currently trading at its lowest levels since 2009.
GBP/EUR Weak Despite Surprise UK Budget Surplus
Omitting the October flash crash that saw Sterling pairs plunge over five cents and then recover within a matter of minutes, Sterling entered last week’s session close to eight-year lows versus the single currency. And demand for GBP/EUR remained weak on Tuesday even though Britain posted a surprise July budget surplus of £0.184 billion. The upbeat score reflected an unexpected rise in self-assessment tax intake, however, it was not enough to send Sterling higher.
Pound Hits Fresh 8-Year Low as Eurozone Manufacturing Impresses
GBP/EUR tumbled to a fresh eight-year low on Wednesday as anxieties over a lack of progress in the Brexit negotiations weighed on Sterling, while an upbeat European factory output score bolstered the appeal of the emboldened Euro. The latest Eurozone manufacturing PMI printed at a six-year high of 57.4.
A mild acceleration of British GDP growth, from 0.2% to 0.3% in the second quarter, gave Sterling a minor boost on Thursday, but the UK currency struggled to hold onto its gains through the afternoon.
ECB’s Mario Draghi Allows Euro to Rise Following Jackson Hole Speech
The Pound slumped by around a cent to strike new eight-year lows over the Bank Holiday weekend in reaction to European Central Bank (ECB) President Mario Draghi’s speech at the Jackson Hole economic symposium. The ECB chief refrained from hinting at future policy, but markets were cheered by his decision not to address the Euro’s recent appreciation. Speculation had suggested that Draghi would attempt to talk down the single currency in order to help boost inflation prospects in the bloc. The fact that Draghi did not jawbone the common currency was therefore seen as a bullish signal for the Euro.
With little progress seemingly being made in Brexit negotiations the outlook does not look good for Sterling. The only important UK ecostat is expected to show that manufacturing output slowed minimally from 55.1 to 55.0 in August, which shouldn’t have too much of an impact on GBP/EUR.
The August Eurozone consumer price index report, however, could prove more decisive. Anything lower than the 1.4% median market consensus could prompt traders to reassess their ECB tightening bets, while a surprise to the upside could give the Euro more ammunition to press ahead further against the Pound.