- EUR/GBP Nears Two-Month-Low – Euro unable to hold ground against Pound
- Investors Doubt ECB Effectiveness – Euro (EUR) weakened by policy concerns
- ‘Brexit’ Bets Continue to Decline – Pound (GBP) rapidly regaining strength
- Forecast: UK GDP on Wednesday – Tuesday’s session barren of data
Euro Edges Higher on Promising Data
Finally managing to slow the Pound’s recent bullish run, the Euro to Pound Sterling exchange rate gained a slight 0.2% during Wednesday’s session.
GfK’s May German consumer confidence report scored an unexpectedly high 9.7, despite forecasts that it would remain at 9.4.
Later on, the UK’s key Gross Domestic Product (GDP) reports were released. The year-on-year print remained at a healthy 2.1%, beating forecasts that it would drop to 2.0%.
However, the quarterly report slipped from 0.6% to its forecast score of 0.4%. While the figure printed as expected, investors’ mixed feelings on the slowed growth was enough to hold the Pound back from further rallies and allow the Euro to recover slightly.
EUR/GBP Fluctuates Throughout Tuesday
The Euro to Pound Sterling exchange rate currently trades at around 0.7750, -0.3% down on the day’s opening levels.
The pair has fluctuated throughout the day without definite direction, drooping to a new low of 0.7737 in the early afternoon.
Investors seem to have settled in their positions ahead of Wednesday’s major data releases, which include German GfK consumer confidence and UK GDP.
The Euro to Pound (EUR/GBP) exchange rate failed to sustain any gains during yesterday’s session despite the possible loss of 11,000 jobs following British Home Stores (BHS) entering administration as Eurozone data held the Euro down.
EUR/GBP briefly managed a high of 0.7805 on Monday, but since then has slipped around 50 pips. The pair currently trends in the region of -0.7750.
Euro (EUR) Uninspired on Disappointing Eurozone Data, ECB Concerns
The shared currency was struggling on Tuesday as no optimistic data was able to help it recover ground against an increasingly strong Pound.
Monday’s limited data releases included April’s German IFO reports – all of which printed below expectations.
The business climate report came in at 106.6, below forecasts that March’s 106.7 would improve to 107.1. Current assessment data worsened to 113.2, undercutting projections that it would hold steady at 113.8. Lastly, the expectations report printed above March’s 100.0 at 100.4, but still let down estimates of 100.9.
The Euro has also experienced pressure from ongoing discussions over the effectiveness of the European Central Bank’s (ECB) attempts at stimulating the Eurozone economy.
The Wall Street Journal (WSJ) published a piece suggesting that the ECB’s inflation expectations might be misplaced;
‘“To have such a pronounced difference is very unusual,” said Peter Schaffrik, analyst at RBC Capital Markets. “What the market is telling us is that something is going on that central banks cannot really control.”
Indeed, markets appear to have lost faith that the ECB can truly steer inflation in the medium-term, while still believing that the recent rally in oil prices will mean slightly higher inflation over the following months.’
Pound (GBP) Buoyed Despite Poor Mortgage Approval Data
Sterling’s bullish run continues as it maintains its strength despite Tuesday’s sole UK data release printing below expectations.
The BBA published its March mortgage approvals report on Tuesday morning, which was forecast to improve from 45,646 to 46,500. Instead, the relatively important score came in at 50,098, a considerable and unexpected drop.
Yesterday’s big job-related news in Britain was that retail chain British Home Stores (BHS) had entered administration, putting over 10,000 jobs at risk. However, as of Tuesday stores remain open, with the BBC reporting that there are currently no plans for immediate redundancies or store closures.
News from The Telegraph also indicates that the amount of voters who intend to vote for the UK to ‘Remain’ in the EU has steadily increased over time, and could increase further as the June vote approaches.
Lastly, Bloomberg has observed the Pound’s recent changes in volatility, claiming that GBP volatility has seen its sharpest drop since 2015’s election results simply due to increased support for the ‘Remain’ referendum campaign.
Euro to Sterling (EUR/GBP) Exchange Rate Forecast: Pound Rally Could Slow on GDP Tomorrow
Pound investors are currently hugely wrapped up in ‘Brexit’ debates, and negative British data has largely been ignored over the last week.
However, tomorrow’s UK report could finally see some data-influenced movement in the Euro to Pound exchange rate. Q1’s key Gross Domestic Product (GDP) report is due for release on Wednesday morning.
Scores are currently forecast to slow from 2.1% to 2.0% in the year-on-year set, and from 0.6% to 0.4% in the quarterly report. Figures below the expected numbers could certainly weigh on the Pound as it would remind investors that the British economy continues to struggle even within the EU.
The Euro’s movement is less likely to be inspired tomorrow, with the only major release being Germany’s GfK consumer confidence survey. The May report is currently projected to hold steady at 9.4.
The Euro to Pound Sterling (EUR/GBP) exchange rate trends in the region of 0.7750, while the Pound Sterling to Euro (GBP/EUR) exchange rate trades at around 1.2905.