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2017 Pound Euro Forecast: Could GBP/EUR Exchange Rate Extend This Week’s Losses if UK PMIs Disappoint?

  • British Pound Euro Exchange Rate Near 1.17 in 2017 – Hits 1.17 high on Friday
  • Eurozone Inflation Data Disappoints – ECB tightening hopes fade
  • GBP Forecast: March PMIs in Focus ­– Markit economic reports out this week
  • EUR Forecast: Eurozone Retail Sales on Tuesday – Final March PMIs on Wednesday

2017 Pound Euro Slips on Monday as UK Manufacturing Slows

Monday saw the 2017 Pound Euro exchange rate fall from its weekend highs. The pair continued to edge lower throughout the day’s European session due to the morning’s disappointing UK manufacturing stats.

Sterling could remain limp throughout Tuesday’s session as the day’s UK construction PMI is unlikely to be highly influential, especially with Wednesday’s upcoming services PMI so much more pivotal.

As a result, GBP EUR will be driven by Euro movement on Tuesday. The shared currency could be bolstered if February retail sales for the Eurozone beat expectations as it will indicate that consumers are coping well with rising inflation so far.

European Central Bank (ECB) President Mario Draghi will also be holding a speech on Tuesday. If Draghi takes up a cautious tone following last week’s disappointing Eurozone inflation stats, the Euro is likely to weaken.

[Previously updated 13:02 BST 03/04/2017]

The 2017 British Pound to Euro exchange rate slipped from its weekend highs when markets opened on Monday as investors reacted to Markit’s March manufacturing PMIs for Britain and the Eurozone.

Britain’s manufacturing stats dropped from February’s 54.5 to 54.2 in March despite being predicted to improve to 55.1. What’s more, February’s result was revised lower from 54.6.

This increased concerns that Britain’s other economic sectors, including its highly important services sector, could also fail to meet expectations in March.

The Eurozone’s PMIs generally met the projections set in preliminary figures. However, Spain’s manufacturing PMI failed to meet expectations, while Italy’s manufacturing beat expectations considerably.

[Published 06:00 BST 03/04/2017]

The 2017 British Pound to Euro exchange rate advanced last week as the latest Eurozone ecostats disappointed investors and optimism towards UK-EU Brexit negotiations helped keep Brexit jitters at bay.

GBP EUR began last week trending at the level of 1.15 but by the end of the week was trending comfortably in the region of 1.16. The pair briefly touched 1.17 on Friday morning – its best level since the beginning of March.

Pound (GBP) falls from Highs as UK Growth Disappoints

The Pound hit its best level in nearly a month against the Euro on Friday, but the British currency was unable to hold its best levels following the publication of Britain’s final Q4 2016 Gross Domestic Product (GDP).

According to the report, Britain’s quarter-on-quarter growth came in at 0.7% in Q4 as expected, but the yearly growth stat only came in at 1.9% and missed the forecast 2% result.

Investors were also disappointed by news that the quarterly Q3 GDP figure had been revised down from 0.6% to 0.5%. This deepened concerns that Britain has not performed as strongly since the Brexit vote as hoped and that its economic performance could worsen in 2017.

The Pound had surged earlier in the week after the British government activated Article 50 and began the formal Brexit process, as UK and EU leaders appeared to take a friendly tone towards separation proceedings.

With full-scale Brexit negotiations unlikely to begin until May or June, investors expect the Pound volatility will cool for a few weeks which has also added to Sterling appeal.

Euro (EUR) Weakens as Hopes for ECB Tightening Fade

In recent weeks, Eurozone data has been strong and the European Central Bank (ECB) had seen an increase in calls to tighten the Eurozone’s monetary policy.

The Eurozone inflation outlook looked to be firming and bets increased that the ECB could pull back on quantitative easing (QE) or even hike interest rates in the mid-term.

However, last week’s preliminary Eurozone inflation stats from March were highly disappointing. Germany’s month-on-month Consumer Price Index (CPI) dropped from 0.6% to 0.2% despite being expected to slip to 0.4%, while the yearly figure slumped from 2.2% to 1.6% and missed the forecast 1.9%.

Friday’s session followed with the publication of disappointing year-on-year Eurozone inflation projections. The figure fell from 2% to 1.5% and missed the 1.8% forecast.

Some analysts were quick to point out that a drop in yearly inflation was widely expected due to the timing of Easter this year. In 2016, Easter was in late-March whereas this year Easter is in April. However, the figure was still well below analyst expectations.

Friday’s other Eurozone data was mixed but Germany’s March unemployment rate unexpectedly improved its lowest level on record since the German reunification. The figure unexpectedly improved to 5.8%.

2017 British Pound to Euro Forecast: PMI Stats in Focus

The coming week will see the publication of Britain and the Eurozone’s final March PMIs from Markit, which will give traders an indication of how each economy performed throughout the month.

As services include retail and account for most of Britain’s Gross Domestic Product (GDP), investors will be looking for signs of economic slowdown from Britain’s services PMI which publishes on Wednesday.

A worse-than-expected services PMI for Britain could cause the Pound to drop as concerns worsen about the speculated UK consumer squeeze affecting the nation’s growth negatively.

Manufacturing stats for Britain and the Eurozone will be published on Monday. UK construction PMI will be published on Tuesday. Wednesday’s overall composite PMIs will also be influential to GBP EUR exchange rate movement.

Also worthy of note will be the Eurozone’s February unemployment rate results, which come in on Monday and February Eurozone retail sales due on Tuesday.

Perhaps the biggest focus for Euro traders next week however will be increased political jitters. With April underway, Euro investors will be anxiously awaiting the 2017 France Presidential election which begins towards the end of the month.

The first round of the election will be held on the 23rd of April and anti-EU candidate Marine Le Pen is expected to put on a strong showing. Opinion polls indicate she is likely to go head to head with pro-EU candidate Emmanuel Macron in the second round, which is held on the 7th of May.

For once, political jitters are more likely to weigh on the Euro in the 2017 British Pound Euro exchange rate in the coming week.