Euro to Pound Exchange Rate Edges Higher Thanks to Forecast-Beating Eurozone Data
Tuesday saw the publication of a slew of Eurozone and UK ecostats, and despite most recent Eurozone data falling short, the latest figures helped the Euro to Pound Sterling (EUR/GBP) exchange rate to continue its recent advance.
Brexit jitters caused EUR/GBP to rebound strongly last week, regaining over half of the losses it had seen the previous week and jumping from 0.8635 to 0.8759.
EUR/GBP gains have been modest this week so far, the pair trending at the level of 0.8778 at the time of writing today. However, the pair may be in for further gains if German data due towards the end of the week is able to best market expectations.
Investors are concerned about a slowdown in the Eurozone’s economy, but as Tuesday’s Eurozone data was less disappointing than the latest UK data the Euro to Pound exchange rate was able to continue its gradual climb.
Euro (EUR) Exchange Rate Finds Limited Strength Following Mixed PMI Results
For much of the past week, the Euro’s (EUR) strength has been limited due to signs that Germany’s economy was on track to see a longer economic slowdown than previously expected.
Germany’s data continues to fall short of expectations this week, worsening concerns about the Eurozone’s biggest economy, but much of Tuesday’s other Eurozone ecostats offset concerns slightly and printed better than forecasts predicted.
The Eurozone’s overall services PMI remained at 51.2, rather than falling to 50.8 as expected. As a result, the composite PMI only slipped from 51.2 to 51 rather than the expected 50.7.
On top of this, the Eurozone’s December retail sales results slowed from 1.8% to 0.8% year-on-year instead of the forecast 0.5%. These figures helped the Euro to edge higher versus a weaker Pound (GBP) today.
However, these stats weren’t exactly strong either and still indicated that the Eurozone economy was slowing. This meant that EUR/GBP gains were modest.
Pound (GBP) Exchange Rates Sold as UK PMIs All Fall Short
After UK manufacturing and construction PMIs fell short in recent sessions, the Pound’s appeal was further dented today as Markit’s January services PMI indicated that the services sector was nearing stagnation.
Markit’s January services PMI was forecast to have slipped from 51.1 to 51.0. While the previous figure was revised slightly higher to 51.2, the new figure printed at just 50.1. This put it just barely above the 50 point mark separating stagnation from growth.
Analysts were concerned about the practically stagnant services growth, with businesses indicating that a combination of lasting Brexit uncertainties and global growth concerns were the cause of the weaker business activity.
These figures served as a market reminder that there was still no resolution on Brexit. According to Sam Cooper, Vice President of Market Risk Solutions at Silicon Valley Bank:
‘Today’s weak reading adds to the downward pressure currently exerted on Sterling as fears of an economic slowdown in the face of Brexit uncertainty begin to surface.
While the data will feed some short-term volatility to the Pound, focus will remain on Westminster as the main engine behind long term sterling strength as Brexit plays out.’
Euro to Pound (EUR/GBP) Exchange Rate Investors Await German Ecostats
With Brexit uncertainties keeping pressure on the Pound, the Euro is more likely to drive Euro to Pound (EUR/GBP) exchange rate movement for the remainder of the week – at least until there is some kind of Brexit development.
Most of the week’s most influential Eurozone data has been published, but influential German factory and trade data due in the second half of the week could make investors more anxious about Germany’s slowing economy.
German factory orders stats from December, will be published on Wednesday, as well as January’s construction PMI.
December’s German industrial production report will follow on Thursday, with Germany’s December trade balance report rounding off the week on Friday.
The Bank of England (BoE) will hold its February policy decision on Thursday, but unless the bank’s tone notable changes or has an impact on the Brexit outlook it is unlikely to cause much movement in the Euro to Pound (EUR/GBP) exchange rate.