TORfx weekly Pound Euro exchange rate update.

 As of 17:30 GMT on 16/07, the Pound was trading against the Euro in the region of 1.4315

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Another tumultuous week for the Pound Sterling to Euro (GBP/EUR) exchange rate saw the currency pair advance from a low of 1.3851 to achieve a fresh seven-year high of 1.4358 before the weekend. 

 

While the situation in Greece continued to limit demand for the common currency, as it has done for the past six months, the Pound was able to trend higher across the board in spite of mixed UK data. 

 

The UK’s inflation figures confirmed forecasts for a stagnant rate of consumer price gains in June, but the data had little impact on the Pound as investors remain confident that inflation will rebound by the beginning of next year. 

 

Similarly, the impact of an unexpected increase in the UK’s unemployment rate was countered by the news that average earnings rose to the highest level for five years in the three months through May. Comments from two high-profile Bank of England officials regarding the timeline for increasing UK interest rates also kept the Pound trending higher. 

 

Both BoE chief Mark Carney and formally dovish policymaker David Miles have asserted that interest rates are on course to be revised ‘soon’. Given that the European Central Bank (ECB) has adopted negative interest rates and doesn’t seem to have any intention of bringing them back into positive territory for the foreseeable future, the divergence in the policy outlooks of the two central banks is likely to continue promoting the GBP/EUR uptrend in the short to medium term. 

 

Meanwhile, over in Greece the public engaged in violent riots to express their anger at local MPs voting to implement the ‘absurd’ bailout demands issued by creditors. The level of unrest and the hurdles Greece still faces before it can unlock funding have contributed to the Pound Sterling to Euro (GBP/EUR) exchange rate’s push higher this week. 

 

Next week we could see the Pound romp higher still against its common currency counterpart as the minutes from the last BoE policy meeting are published. Minutes showing that policymakers were split on the subject of interest rate revisions would be highly Sterling-supportive and the GBP/EUR currency pair could approach new multi-year highs in the days ahead.

 

Conversely, disappointing UK reports or a return to dovish form may see the Pound reverse its recent leap forward.   

 

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