- British Pound Euro Exchange Rate Recovers to 1.17 – GBP traders price in March inflation
- ECB Dovishness Weighs on Euro – As well as French election jitters
- UK Inflation Decent– But not impressive enough to inspire GBP gains
- Forecast: Eurozone Inflation Data Next Week – As well as UK retail sales
British Pound Euro Holds Highs on Wednesday
While it never quite touched on the key level of 1.18, the British Pound Euro exchange rate tested its best levels in over a month on Wednesday.
The Euro continued to see pressure from political uncertainty, leaving the Pound more appealing to traders. This allowed GBP EUR to hold most of this week’s gains and trend in the region of 1.17 despite slowing UK wage growth.
Britain’s other employment stats also failed to impress on Wednesday.
Only 39k new jobs were created in the three months into February, lower than the projected increase of 70k.
March’s jobless claims change results came in at 25.5k, indicating that many people left work and signed up for job-seekers benefits last month.
As a result of the generally underwhelming UK employment data, the British Pound Euro exchange rate may see its advancement potential limited for the rest of this week.
[Previously updated 12:52 BST 12/04/2017]
Wednesday saw the British Pound Euro exchange rate’s gains slow as the latest UK employment data came in mixed and left GBP investors slightly more concerned about Britain’s 2017 economic activity.
The Pound continued to benefit from this week’s risk-averse market movement, especially as the Euro was pressured by French election jitters.
However, investors held back on Sterling gains after it was confirmed that UK wage growth did indeed slow in the three months into February. This led analysts to increasingly believe that Britain’s economy would slow as UK households faced lower wages and higher consumer prices.
[Previously updated 16:45 BST 11/04/2017]
British Pound Euro Exchange Rate Continues Recovery
Wednesday saw the British Pound Euro exchange rate put in another day of modest gains. While its movement was flat earlier in the day, geopolitical jitters when American markets opened led to an increase in Sterling demand.
The Pound benefitted from an increase in demand for safe and secure UK government bonds on Tuesday afternoon as investors sold risky assets in favour of ‘safe haven’ ones.
Wednesday’s session could be highly influential for the Pound. If UK job figures from the three months into February impress traders, GBP EUR could extend this week’s recovery run.
[Previously updated 13:01 BST 11/04/2017]
Tuesday’s key UK and Eurozone datasets led to little notable change in the British Pound Euro exchange rate’s movement. GBP EUR spent most of Tuesday morning trending in the region of 1.17, holding most of Monday’s gains without advancing further.
Britain’s highly anticipated March Consumer Price Index (CPI) results largely met expectations, coming in at 2.3% year-on-year and slipping to 0.4% month-on-month. The monthly result was slightly impressive as analysts expected a slow to 0.3%, but overall the report was not enough to inspire further GBP EUR gains.
The Eurozone’s ZEW economic sentiment surveys impressed traders, bolstering Euro support and helping it to hold its ground against the Pound.
[Published 06:00 BST 11/04/2017]
The British Pound Euro exchange rate advanced when European markets opened on Monday as investors bought the Pound up from last week’s lows. Anticipation for Britain’s upcoming inflation results as well as a weak Euro helped GBP EUR hold its Monday gains.
GBP EUR was highly volatile last week but ultimately fell. The pair opened at the level of 1.17 and lost almost a cent throughout the week, ending at the level of 1.16. But when markets opened this week, GBP EUR quickly bounced back.
Pound (GBP) Firms Ahead of Tuesday’s UK Inflation Report
Despite a lack of fresh economic data for Britain or the Eurozone on Monday, the British Pound to Euro exchange rate was able to advance during Monday’s European session.
This was largely due to market anticipation for Tuesday’s UK Consumer Price Index (CPI) report, amid hopes that another set of strong UK inflation stats could pressure the Bank of England (BoE) into action.
Investors also took the quiet data day to buy the Pound up from its weekend lows of 1.16.
Other factors adding to the Pound’s appeal on Monday included news that financial sector businesses in the City of London were feeling slightly more optimistic about the Brexit outlook in recent months.
Mark Boleat, policy chief for City of London Corporation, stated that he believed London would remain a leading financial hub and that most banking jobs would not move into Europe. He also expressed confidence that UK-EU trade negotiations would go smoothly and quickly.
Lastly, highly secure UK government bonds have been an appealing asset for traders looking for ‘safe haven’ investments this week amid rising geopolitical tensions and uncertainty.
Euro (EUR) Slips as Eurozone Outlook Remains Uncertain
While Sterling investors have been cooling somewhat on Brexit jitters in recent weeks, the political and economic outlook in the Eurozone remains mixed.
Last week saw the long-term Euro outlook dented by dovish comments from European Central Bank (ECB) President Mario Draghi. Draghi’s cautious sentiment was also echoed by other key ECB figures, including board member Peter Praet and ECB Vice President Vítor Constâncio.
In a stance that was only surprising to some analysts, Draghi indicated that Eurozone monetary policy was unlikely to be tightened any time soon. He also stated that the bank’s quantitative easing (QE) program would have to end before interest rate hikes and other tightening measures were considered.
Investors had been hoping in recent months that as Eurozone deflation risks subsided and growth continued improving, the ECB could be pressured into tightening monetary policy from its record lows. As a result, Draghi’s cautiousness was disappointing to more bullish traders.
Political jitters have also weighed on the Euro. The French Presidential election begins towards the end of April and concerns are still high that anti-EU candidate Marine Le Pen could perform far better than expected.
British Pound Euro Forecast: Britain’s Inflation Stats in Focus
Tuesday morning will see the publication of Britain’s March Consumer Price Index (CPI) results, which is also likely to be this week’s most influential ecostat when it comes to the British Pound to Euro exchange rate.
British inflation is currently projected to slow from 0.7% to around 0.3% month-on-month, with yearly inflation remaining at 2.3% as producers begin to adjust from the Pound’s shift in value following strong high street price increases in January and February.
If inflation comes in higher than expected, the Pound is likely to see a surge in demand. In this situation, investors will become increasingly hopeful that underlying inflationary pressures are improving in Britain, or that inflation could otherwise pressure the Bank of England (BoE) into tightening UK monetary policy.
However, the BoE has stated many times since the Brexit vote that it will overlook inflation caused purely by the Pound’s drop in value.
If this is reaffirmed by bank officials following an impressive UK inflation report, the Pound’s advances will be limited this week.
Tuesday will also see the publication of the latest German and Eurozone economic sentiment surveys from ZEW. The Eurozone print is expected to slow from 25.6 to 25 in April while the German print is predicted to improve from 12.8 to 14.
As this will be the week’s most influential Eurozone data, Tuesday is likely to be the most vital session this week for the British Pound to Euro exchange rate.