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GBP/EUR Drops to Seven-Year Low and Euro Rallies, AUD/GBP Higher

As the euro jumped against the dollar, it was given some further buoyancy to climb against sterling. Britain’s trade balance data disappointed markets yesterday when it was revealed that the deficit grew in June following the hung parliament result. Now some of the largest banks such as HSBC and Morgan Stanley have predicted the euro will have a higher value than the pound before the year closes.

The euro may be offered more opportunity to rally if the European Central Bank (ECB) decides to start the removal process of its stimulus programme.

However, this week did bring some good news for the UK economy in the form of industrial output data. Industrial production rose by 0.5% in June bypassing economists’ expectations. Overall production in quarter two sank by 0.4% on the quarter, encouraged lower by a 0.6% decline in car manufacturing.

Meanwhile, the Australian Dollar traded back and forth on Friday as investors digested geopolitical tensions and comments from Reserve Bank of Australia (RBA) Governor Philip Lowe. The Aussie was able to register gains towards the end of the week as the RBA Governor suggested that the market’s expectation for a rate rise next year was largely accurate – a change from the usual dovish rhetoric. The Governor also said that the strong AUD exchange rate would be likely to hinder inflation and employment growth.

The current GBP/EUR exchange rate is trending in the region of 1.0989. The pound to Australian dollar (GBP/AUD) exchange rate is trading at around 1.6477.

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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