The euro strengthened regardless of downbeat German data.
The euro firmed despite Germany’s trade balance widely missing prediction. The trade surplus declined drastically to 4.9 billion pounds in July, missing the 6.2 billion estimate.
Nevertheless, the increased anticipation of another massive rate hike during the next policy conference lent considerable support.
Meanwhile, Reuters’ economists revealed that anticipation of a 75 basis points hike stands at an 80% probability. Swedbank economist Nerijus Maciulis stated that the ECB (European Central Bank) would have to stiffen monetary policy amid higher-than-anticipated inflation rated & challenged of cooling it.
He added that the European Central Bank would continue surging rates at accelerated speeds, sending a hawkish stance. It should mend its reputation and ensure victory after inflation begins to retreat. Also, the relatively weakening USD propels the euro higher.
Meanwhile, unemployment numbers missed predictions, propping up to 3.7% – the highest mark since February. That comes after better-than-anticipated NFP (non-farm payrolls) data, substantially lower than the past month, though better than predicted.
Political Front
Nevertheless, tensions seem to simmer again over Brexit’s hot topic. With the United Kingdom political race about to end, the predictions of favorite Liz Truss reigning have left the euro uneasy.
The disparaging remarks about France’s Emmanuel Macron and her massive Northern Ireland protocol’s hard-lined stance renewed worries of an EU/UK trade battle.
Nils Schmid of Germany’s ruling party believed they should give the new PM a chance. He added that the current moves are proving anyone who thought things couldn’t get worse after Johnson wrong. Schmid believes most statements by Mrs. Truss are wrong or unfortunate.
The BCC (British Chambers of Commerce) has published their quarterly data, predicting imminent inflation within the upcoming months. More calls for authority intervention are soaring, with small forms and households looking at risk.
BCC President Baroness Ruby McGregor-Smith confirmed that most leading businesses would struggle. Nevertheless, SMEs remain the backbone of the economy. He added that support remains crucial like COVID times.
GBP/EUR Rate Prediction
Market players will focus on the European Central Bank financial meeting next week. Surprise surges in PPI data and inflation bolster forecasts for a 75 basis point hike, possibly bolstering the single currency.
Meanwhile, the UK awaits the new Prime Minister on Monday. The turmoil will likely end after months of worries. Investors will keenly wait for more financial backing for UK businesses and households.
