- British Pound Euro 2017 Exchange Rate Nears 1.15 – Weak UK services weakens GBP
- Euro Fails to Benefit from Mixed Manufacturing PMI – German manufacturing estimate revised lower
- BoE Leaves Rates Frozen – But frozen inflation outlook sends Pound falling
- EUR Forecast: German Ecostats Due Next Week – Quieter eco-calendar ahead
British Pound Euro 2017 Exchange Rate Slips on Friday
After holding its ground for much of Friday morning, the British Pound Euro 2017 exchange rate slumped again on Friday afternoon as investors sold the Pound after a disappointing week for UK news.
Reacting to the week’s Bank of England (BoE) news and services PMI from Markit, the Pound selloff was extended towards the end of the week’s European session.
Meanwhile, demand for the Euro remained sturdy throughout the day. The Eurozone’s services and composite PMIs beat expectations thanks to German services improving to 53.4. The figure was predicted to slip from 54.3 to 53.2.
As a result, the Eurozone’s services PMI remained at 53.7 rather than slipping to 53.6. The composite figure held at 54.4 and avoided a drop to 54.3.
The British Pound Euro 2017 exchange rate is unlikely to see a considerable recovery next week due to a quiet economic calendar, unless Brexit news impresses Sterling traders.
[Previously updated 13:18 GMT 03/02/2017]
Despite brief attempts to recover from its lows on Friday morning, the British Pound Euro 2017 exchange rate remained weak in the first half of the European session.
The day’s UK services PMI from Markit slowed further than expected, from 56.2 to 54.5. The figure was only predicted to slow to 55.8.
As a result, Markit’s January composite PMI for Britain also fell further than predicted. Expected to slip slightly from 56.7 to 56, the print came in at 55.5. This worsened concerns that UK consumers would soon feel the effects of the Pound’s drop in value.
[Previously updated 16:13 GMT 03/02/2017]
British Pound Euro 2017 Exchange Rate Plunges after ‘Super Thursday’ BoE News
Towards the end of Thursday’s European session, the British Pound Euro 2017 exchange rate continued to extend its daily lows. At its lowest point, GBP EUR had slipped as low as 1.15 but spent most of the day trending at around 1.16.
In its ‘Super Thursday’ meeting minutes, the Bank of England (BoE) indicated that it was once again just as likely to cut UK interest rates as it was to hike them. This underwhelmed traders who had hoped stronger price pressures could lead to a more hawkish outlook.
As for the Euro, demand for the shared currency remained solid throughout the day due to weakness in the Pound and US Dollar (USD).
The day’s European Central Bank (ECB) bulletin didn’t dissuade investors from the shared currency despite its reassertion that Eurozone inflation caused by rising oil prices was not enough to improve to underlying inflation outlook.
[Previously updated 12:49 GMT 02/02/2017]
Following a bullish Wednesday, the Pound saw a comparitively bearish Thursday as the British Pound Euro 2017 exchange rate was sold off from its highs.
Initially sold in a mixture of profit-taking as well as reaction to Wednesday night’s Article 50 vote, Sterling’s losses were extended following Thursday’s Bank of England (BoE) policy decision.
As expected, the bank left monetary policy frozen. However, the bank also upgraded its 2017 UK growth forecast and more or less left the inflation forecast alone.
This surprised investors who sold off the Pound, as this indicated the BoE was no closer to intending an interest rate hike than they had been at the end of last year.
[Published 07:00 GMT 02/02/2017]
The British Pound Euro 2017 exchange rate advanced on Wednesday as Sterling investors were impressed by the day’s UK ecostats while the Euro was held back by mixed Eurozone manufacturing figures.
GBP EUR has returned to the week’s opening levels of 1.17 after plummeting to a low of 1.15 on Tuesday.
Pound (GBP) Benefits from Strong UK Factory Sector
Sterling started the week with a relatively poor performance as concerns grew about Britain’s economic outlook for 2017.
UK consumer credit plummeted to 1.0b in December according to this week’s data, indicating that consumers were avoiding borrowing amid expectations that the low value of the Pound would hit consumer prices soon.
This worsened fears that growth would slow significantly in the coming months, as consumer spending was one of the primary reasons for Britain’s strong growth in late 2016.
Despite this, Sterling benefitted heavily from Wednesday’s January manufacturing PMI. Markit’s print slipped slightly from 56.1 to 55.9 as expected, but this still meant growth in the sector was high.
However, perhaps the most impressive part of the report was the news that factory input prices had seen the biggest surge since Markit records began. According to Rob Dobson from Markit;
‘The big numbers coming out of the January survey were for the price measures. Input cost inflation spiked to the highest seen since data were first collected in 1992. Over 55% of companies link rising costs to the exchange rate.’
The news bolstered hopes among traders that this could lead to a surge in inflation, which some reasoned could be enough to pressure the Bank of England (BoE) to hike interest rates after all.
Sterling was also supported by confirmation that informal UK-US trade talks were due to begin in Washington next week.
Euro (EUR) Fails to Find Support in January’s Manufacturing Results
The Euro performed poorly on Wednesday despite strong Eurozone ecostats earlier in the week.
Increased demand for the US Dollar ahead of Wednesday evening’s Federal Reserve meeting kept EUR strength limited for most of the European session.
As a result, the day’s Eurozone manufacturing PMIs from Markit was not enough to support the shared currency.
The final January manufacturing PMIs for the bloc generally beat expectations, with Eurozone bloc manufacturing improving to 55.2.
However, investors were slightly disappointed as Italian manufacturing unexpectedly dropped to a two-month low of 53. German manufacturing, earlier estimated at 56.5, instead printed at 56.4, although this was still the strongest pace of sector growth in three-years.
Overall, the figures indicated a strong start to the year for the Eurozone’s manufacturing sector. According to Chris Williamson from Markit;
‘If current growth of manufacturing activity and the associated rise in prices is sustained, rhetoric at the ECB is likely to become more hawkish, albeit tempered with caution over the potential for political developments to cloud the outlook.’
Despite the solid report, Sterling was able to easily advance against the Euro throughout Wednesday’s European session.
British Pound Euro 2017 Exchange Rate Forecast: Bank of England (BoE) Meeting in Focus
Thursday sees the first Bank of England (BoE) policy decision since the turn of the year and investors are still hoping for signs or hints that Britain’s interest rate outlook will improve.
Following the policy decision, which is expected to see monetary policy left frozen, BoE Governor Mark Carney will hold a press conference that is likely to be highly influential for the rest of this week’s Pound movement.
If Carney so much as hints at the possibility of UK interest rates being hiked in the next year to combat inflation or other economic pressures, Sterling is likely to soar.
However, a neutral or dovish tone, particularly amid concerns of slowing growth due to lower consumer spending, is likely to cause the Pound to fall back towards its weekly lows against the Euro.
The day’s Eurozone economic calendar will be comparatively quiet. The European Central Bank (ECB) will publish its latest economic bulletin and ECB President Mario Draghi is due to make a speech in Ljubljana.
To round off the week, even if the BoE disappoints on Thursday the Pound could be supported if Markit’s January services and composite PMIs, released on Friday, beat expectations like the manufacturing sector did. This could allow the British Pound Euro 2017 exchange rate to end the week higher.