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Could 2017 Pound Euro Exchange Rate Recover if UK Services Data Impresses?

  • 2017 Pound Euro Exchange Rate at 1.16 on Thursday – GBP traders await 2017 UK data
  • UK Construction PMI Beats Expectations – Increases hopes that UK services will be solid
  • GBP Forecast: UK Services PMI in Focus – Pound could rise if biggest UK sector impresses
  • EUR Forecast: Eurozone Retail Sales Ahead – Sterling likely to drive GBP EUR until next week

The 2017 Pound Euro exchange rate edged away from near-monthly lows on Thursday, but the day’s UK construction stats were unable to offer GBP EUR a significant boost.

During Thursday’s session GBP EUR trended in the region of 1.16. GBP EUR has lost almost a cent and a half in value this week after opening at the level of 1.18.

Pound Sterling (GBP) Recovers from Lows after UK Construction Data

After slumping for most of the week, the Pound finally found some decent support on Thursday due to the publication of Markit’s February UK construction PMI.

UK construction improved from 52.2 to 52.5 throughout the month despite being projected to remain at 52.2.

While construction is not typically a significant part of Britain’s growth, the better-than-expected result bolstered hopes that British economic activity had not slowed as much in February as feared.

Wednesday’s UK manufacturing PMI saw an unexpected drop from 55.9 to 54.6 instead of merely slipping to 55.6 as forecast. This caused concern earlier in the week that Britain would see growth slow significantly later in 2017, causing the Pound Euro exchange rate to plunge.

GBP EUR recovery was limited on Thursday however, as Markit’s construction report indicated that things could still slow in the coming months. According to Tim Moore from IHS Markit;

‘There was little sign that the UK storms had a material impact on construction growth in February, although some firms noted that longer delivery times for roof tiles had added to supply chain issues. Instead, survey respondents mainly cited an underlying slowdown in sales growth, with the latest rise in new work the weakest for four months.’

As a result, markets decided to wait for Friday’s key services PMI results before breathing any sighs of relief.

Euro (EUR) Strength Slows with Eurozone Inflation Subdued

Demand for the Euro remained firm on Thursday due to this week’s slew of solid Eurozone ecostats, but they weren’t quite impressive enough to push the Pound Euro exchange rate down even further.

Thursday saw the publication of the Eurozone’s January unemployment rate and preliminary February year-on-year Consumer Price Index (CPI) figures.

However, as all these significant results met expectations the Euro was little changed.

Unemployment remained at the same seven-year-low of 9.6% seen in December. Eurozone inflation looked to rise 1.8% to 2% year-on-year in February as forecast.

Analysts were quick to note that as the European Central Bank (ECB) has stated in recent months, the rise in Eurozone inflation is not due to underlying inflationary pressures in the bloc. Jennifer McKeown, chief European economist from Capital Economics, stated;

‘February’s rise in Eurozone consumer price inflation put it in line with the ECB’s 2% price stability ceiling for the first time since January 2013, but underlying price pressures remain subdued. The pick-up entirely reflected higher energy and food inflation while the core rate was unchanged at just 0.9%.’

2017 Pound Euro Exchange Rate Forecast: UK Services PMI in Focus

Friday’s European session has the potential to see the biggest Pound Euro exchange rate movement of the week, depending on the strength of the day’s February UK services PMI from Markit.

Services are projected to slip slightly from 54.5 to 54.1 in February. If the print comes in below this, concerns that Britain’s retail activity will slow enough to damage UK growth throughout 2017 will worsen.

As services make up Britain’s most important economic sectors, a disappointing services PMI could dampen short to long-term UK GDP outlooks and even cause GBP EUR to fall to new weekly lows.

On the other hand, a better-than-expected UK services result could notably lighten UK growth concerns and allow the Pound Euro exchange rate to see a more significant recovery.

Markit’s composite PMI for Britain will also be influential. The figure is expected to improve from 55.5 to around 55.6.

The day’s Eurozone data will be comparatively low-influence, but some has the potential to inspire movement in the shared currency.

February’s final Eurozone services and composite PMIs will be published in the morning, followed by January retail sales for the bloc.

As it stands, the 2017 Pound Euro exchange rate is likely to end the week well below its opening levels unless Friday’s UK services data impresses.