- 2017 GBP EUR Exchange Rate Near 1.17 – But still below weekly highs
- UK Manufacturing Data Disappoints – But services data impresses on Wednesday
- Eurozone Retail Sales Impress – ECB President Draghi speech ahead
- Forecast: Trade Data Due Friday – UK and German trade reports from February
2017 GBP EUR Exchange Rate Rises from Lows on Solid UK Services Data
Wednesday’s European session saw the 2017 GBP EUR exchange rate recover about half of this week’s losses. However, solid Eurozone sentiment and lingering concerns about Britain’s outlook weighed on Sterling’s chances of a full recovery.
While Wednesday’s Eurozone services and composite PMI results from Markit failed to meet preliminary figures, they still printed solid improvements over February and rounded off the best quarter for Eurozone private sector activity since the beginning of the financial crisis.
Analysts have warned that even if Britain’s services sector didn’t slow in March, it’s still at risk of slows in the coming months due to the consumer-facing nature of the sector.
As inflation rises in Britain, consumers are likely to rein in spending, analysts argue. The underlying pressure of this concern is unlikely to fade completely any time soon.
[Previously updated 12:55 BST 05/04/2017]
Demand for the 2017 GBP EUR exchange rate improved on Wednesday morning following the publication of a surprisingly strong UK services PMI from Markit.
According to Markit’s March report, British services jumped from 53.3 to 55 despite being predicted to only improve to 53.5.
This was especially impressive as poor UK manufacturing data from earlier in the week had increased concerns that Britain’s economy was slowing and that services could slow too.
Britain’s composite PMI beat expectations due to the strong services report, rising from 53.7 to 54.7 and overcoming the forecast rise to 53.8.
[Previously updated 13:03 BST 04/04/2017]
The 2017 GBP EUR exchange rate continued to slide on Tuesday morning as investors became increasingly jittery about potential slows in Britain’s services sector.
Tuesday saw the publication of Britain’s March construction PMI. The PMI was predicted to slow from 52.5 to 52.4 but came in even worse than expected at 52.2.
However, due to the generally low-influence of Britain’s construction sector the Pound’s downward trajectory was largely the same and GBP EUR continued to fall at a modest pace.
GBP EUR spent most of Tuesday morning trending in the region of 1.16 after falling from the weekend and Monday’s 1.17 highs.
[Published 06:00 BST 04/04/2017]
The 2017 GBP EUR exchange rate dropped slightly from its weekend highs following the publication of March’s UK and Eurozone manufacturing PMIs. The Eurozone’s solid unemployment figures also lent the shared currency some support.
GBP EUR began this week trending at the level of 1.17 after making a strong advance from 1.15 last week. However, the Pound to Euro exchange rate could fall from its highs depending on Tuesday and Wednesday data.
Pound (GBP) Falls from Highs as UK Manufacturing Disappoints
After last week’s Pound rally, the British currency was stopped in its tracks on Monday morning following the publication of Markit’s UK manufacturing PMI for March.
Not only was the February result revised lower from 54.6 to 54.5, but March’s manufacturing PMI unexpectedly slipped to 54.2. Investors had expected manufacturing to improve to 55.1.
The disappointing manufacturing figure exacerbated concerns that Britain’s economic activity was being hurt due to rising inflation and slowing wage growth.
Analysts have suggested that factory activity slowed due to lower orders as consumers rein in spending.
Duncan Brock, director of customer relationships from the Chartered Institute of Procurement & Supply, also explained that the fall in the Pound has made raw materials pricier which has led to rising input costs in the factory sector;
‘Supplier delivery times have also begun to lag, clogging up the supply chains of British manufacturing. With the rate of new order growth showing early signs of easing in March, manufacturers must act to ensure they are not locked into costly contracts. Now is not the time for manufacturers to rest on their laurels.’
Despite this, GBP EUR losses on Monday were modest. The pair held onto most of last week’s gains as markets remained hopeful that early UK-EU Brexit negotiations would be amicable when they begin in a few months.
Euro (EUR) Benefits from Solid Improvements in Manufacturing and Employment
No major surprises for Euro investors on Monday, but the confirmation of some key ecostats showing growth in the Eurozone was nonetheless welcome.
Following the Eurozone’s preliminary March PMIs from Markit published a couple weeks ago, the final March prints came in on Monday and largely met expectations.
Germany’s print came in at 58.3 and the Eurozone’s at 56.2. Notably, Germany’s factory stats were the best since May 2010 and the Eurozone’s were the best since April 2011. Chris Williamson, Markit’s chief economist, stated;
‘All key business activity gauges – output, new order inflows, exports, backlogs of work and employment – are close to six-year highs.
However, the survey is also signalling the highest incidence of supplier delivery delays for nearly six years, underscoring how suppliers are struggling to meet surging demand.
These delays send a warning signal about rising inflationary pressures, as busy suppliers are often able to hike prices.’
Hints of inflationary pressures were also good news to Euro traders, who will continue speculating about how close the European Central Bank (ECB) is to tightening Eurozone monetary policy.
The Eurozone’s February unemployment rate also impressed, improving from 9.6% to 9.5% as expected – its lowest level since 2009.
2017 GBP EUR Exchange Rate Forecast: Eurozone Retail Sales Ahead
Tuesday’s European session will be a little quieter for Pound trade as the only notable dataset will be Britain’s March construction PMI from Markit. If it fails to meet expectations Sterling could become more jittery, but movement may be muted until Wednesday’s UK services data is published.
The main event for Tuesday will be the publication of the Eurozone’s February retail sales stats. Analysts expect retail sales to improve from -0.1% to 0.5% month-on-month and from 1.2% to 1.4% year-on-year.
These results may also indicate how Eurozone consumers are handling rising inflation, particularly energy prices, in recent months.
Another key event for Euro traders on Tuesday will be a speech from European Central Bank (ECB) President Mario Draghi.
Any indication from Draghi that deflation risks are rising again due to last week’s underwhelming Eurozone inflation stats could send the Euro plummeting and the Pound to Euro exchange rate could be in for another week of gains.
While the Euro will take point on Tuesday, the Pound will return to focus on Wednesday.
As the services sector makes up most of Britain’s Gross Domestic Product (GDP), the results of Wednesday’s UK March services PMI could have a significant impact on the 2017 GBP EUR exchange rate.