- 2017 Pound Sterling Euro Exchange Rate Reaches 1.17 – Euro weak on Monday
- UK Data Disappoints – Trade deficit worsens and production indicates slowing economy
- Update: UK Inflation Solid – But Sterling gains limited on Tuesday
- Forecast: UK Job Stats Ahead – Wednesday could influenced GBP EUR movement
2017 Pound Sterling Euro Exchange Rate Edges Higher on Tuesday
While it trended relatively flatly for most of the day, the 2017 Pound Sterling Euro exchange rate began to advance on Tuesday afternoon.
Hopes that UK inflation would continue to rise, as well as an increase in demand for ‘safe haven’ investments, helped to boost Pound demand.
UK government bonds priced in GBP are considered a highly secure asset, making them appealing for investors looking to avoid risk. When American markets opened on Tuesday, political jitters left safe demand far higher.
However, the Euro was sturdy enough to limit GBP EUR gains. Tuesday’s Eurozone economic sentiment surveys from ZEW all came in above expectations which bolstered the Euro’s defenses.
[Previously updated 12:54 BST 11/04/2017]
Tuesday’s vital UK and Eurozone ecostats came and went, inspiring little change in the 2017 Sterling Euro exchange rate this week.
As analysts forecast, Britain’s year-on-year inflation stat remained at 2.3% in March. The monthly inflation figure beat expectations slightly, slipping from 0.7% to 0.4% rather than the predicted slow to 0.3%.
Investors hoping for much stronger than expected inflation to put additional pressure on the Bank of England (BoE) were disappointed, but the decent stats at least helped GBP EUR to hold most of its Monday gains and trend in the region of 1.17 on Tuesday morning.
[Previously updated 16:28 BST 10/04/2017]
2017 Pound Sterling Euro Exchange Rate Returns to 1.17
The 2017 Pound Sterling Euro exchange rate put in modest gains during Monday’s European session and spent most of the day trending in the region of 1.17. The pair quickly recovered from its weekend level of 1.16.
The drive of Sterling strength throughout the day was largely anticipation for Tuesday’s UK inflation stats. If UK inflation was better in March than expected, investors will become increasingly hopeful that the Bank of England (BoE) could be pressured into tightening monetary policy.
Euro investors are likely to react to the latest economic sentiment surveys from ZEW on Tuesday. ZEW’s German and Eurozone prints for April could cause further weakness in Euro trade if they fail to meet expectations.
Tuesday is likely to be the most vital trade session this week for GBP EUR.
[Previously updated 12:16 BST 10/04/2017]
Despite a lack of fresh economic news on Monday morning, the 2017 Pound Sterling Euro exchange rate advanced during Monday’s European session. GBP EUR reached the level of 1.17 once again.
Investors bought the Pound up from its weekend lows ahead of Tuesday’s highly anticipated UK Consumer Price Index (CPI) report.
The Euro, on the other hand, remained slightly weak due to last week’s European Central Bank (ECB) news, as well as jitters towards the upcoming French Presidential election.
[Published 06:00 BST 10/04/2017]
The 2017 Pound Sterling Euro exchange rate put in a mixed performance last week but ultimately ended the week almost a cent below its opening levels. The pair could see increased demand this week if Britain’s upcoming inflation report impresses GBP traders.
GBP EUR dropped from its highest levels since February at the beginning of last week. While the pair tested the level of 1.17 at various points, it spent most of the week trending in the region of 1.16.
Pound (GBP) Drops as Concern Grows about Slowing UK Economy
Besides a brief recovery attempt in the middle of the week, the Pound spent most of last week tumbling due to underwhelming ecostats. Some economists have taken this to mean that Britain’s economy is beginning to feel pressure from the weight of rising inflation and Brexit uncertainty.
The week’s poor manufacturing and construction PMIs from Markit were followed up on Friday by a slew of February stats that came in well below expectations.
Britain’s trade deficit was expected to lighten slightly in February, to around -£2.2b. However, the figure worsened from –£2.98b to -£3.66b.
Construction output slowed considerably year-on-year, from 2.3% to 0.5%, missing a projected slip to 1.9%. Manufacturing projection and industrial production printed unexpected monthly contractions of -0.1% and -0.7% respectively, while yearly figures also slowed much further than expected.
Howard Archer, economist from IHS Markit, explained why these figures indicate Britain’s economy could be slowing down;
‘A disappointing package of data for the UK economy which fuels suspicion that GDP growth slowed markedly, largely due to consumers becoming more cautious. We suspect UK GDP growth in the first quarter of 2017 slowed to 0.4% quarter-on-quarter from 0.7% quarter-on-quarter in the fourth quarter of 2016 – this would be the weakest growth rate since the first quarter of 2014.’
Euro (EUR) Mixed on ECB News and German Stats
While the Euro saw mixed movement last week, it was ultimately able to advance against the Pound last week due to poor UK data.
The shared currency was also supported slightly on Friday thanks to solid German ecostats from February.
February’s German trade balance impressed, with the nation’s surplus rising to €19.9b. January’s surplus was even revised higher, from €14.8b to €14.9b.
Germany’s industrial production stats also impressed, coming in at 2.2% rather than contracting -0.1% as forecast. However, January’s industrial production figure was revised lower from 2.8% to 2.2%.
The week’s strong German data helped to offset some of the Euro’s weakness from earlier in the week, particularly caused by dovish European Central Bank (ECB) comments on Thursday.
ECB President Mario Draghi as well as other bank officials indicated that the bank would not consider tightening monetary policy for the Eurozone until after its quantitative easing (QE) program had run its course.
Market hopes that the ECB could be pressured by rising inflation to hike interest rates sooner rather than later faded, which limited last week’s Euro gains.
2017 Pound Sterling Euro Forecast: UK Inflation Could Impress GBP Traders
UK inflation has been a double-edged blade since the Brexit vote in 2016. Sterling’s plummet in value has led to an increase in import prices which have started to translate to higher consumer prices.
This has been both good news and bad news. Rising inflation is the primary reason investors have gotten their hopes up that the Bank of England (BoE) could tighten monetary policy from its record-lows sooner rather than later, but rising consumer prices have also potentially contributed to a drop in consumer activity as households look to avoid price increases.
Britain’s March Consumer Price Index (CPI) results will be published on Tuesday. If inflation rises much faster than expected, bets that the BoE will be pressured into tightening monetary policy will increase, leading to stronger demand for the Pound.
However, BoE officials have maintained that the bank will not react to inflation caused by Pound value. If the BoE continues to take this cautious tone, the Pound’s gains will be limited. Of course, if Britain’s economy is slowed by a drop in consumer activity this will also weaken Sterling.
The most important Eurozone data due for publication over the next week will be the April economic sentiment surveys for Germany and the Eurozone from ZEW.
Ultimately, the Pound’s upside potential is quite limited due to concerns surrounding inflation, so the 2017 Pound Sterling Euro exchange rate could fall further next week.