Euro to Pound Exchange Rate Tumbles on Latest Data despite Brexit Uncertainties
Despite higher concerns that UK-EU Brexit negotiations are still stuck in deadlocks regarding issues like the Irish border, the Euro to Pound Sterling (EUR/GBP) exchange rate is on track to end this week lower.
Since opening this week at the level of 0.8898, EUR/GBP has been trending with a downside bias. On Thursday, EUR/GBP touched on a low of 0.8851, the pair’s lowest level in over two months.
EUR/GBP trended closer to the level of 0.8870 at the time of writing.
The primary cause of Euro to Pound exchange rate losses throughout the day was underwhelming Eurozone confidence stats, as well as some stronger than expected UK retail sales data.
However, the pair’s losses were limited by broad US Dollar (USD) weakness supporting the Euro (EUR), and Brexit uncertainties limiting the Pound (GBP). Euro investors are now anticipating Friday’s Eurozone PMI projections from Markit.
Euro (EUR) Exchange Rates Slip as Eurozone Consumer Confidence Sees Notable Contraction
The Euro was unable to hold its ground against Sterling on Thursday, due largely to some stronger than expected UK data but also the day’s underwhelming Eurozone data.
Thursday saw the publication of the Eurozone’s September consumer confidence survey projection.
The confidence figure was forecast to have worsened slightly, from -1.9 to -2.0. However, the contraction was an even worse than expected -2.9.
The European Commission found that confidence in the Eurozone had slipped:
‘In August, the Economic Sentiment Indicator (ESI) decreased slightly in the Eurozone (by 0.5 points to 111.6), while it remained stable in the EU (at 112.3),’
In reaction to the report, the Euro weakened as investors became more concerned about how Eurozone consumers could be impacted by global trade uncertainties.
Still, the Euro was able to avoid further losses due to broad weakness in its biggest rival, the US Dollar (USD). The Euro and US Dollar often see a negative correlation.
Pound (GBP) Exchange Rates Climbs as UK Retail Sales Impress Investors
The Pound was resilient on Thursday, despite this week’s rising concerns that the UK and EU are struggling to reach agreement regarding the issue of how to handle Ireland’s border post-Brexit.
Investors bought the Pound following the publication of Britain’s August retail sales results. Thanks to the retail sales report, the Pound saw fairly solid gains against most major currency rivals, including the Euro.
Britain’s month-on-month inflation rate was forecast to slump from 0.7% to a contraction of -0.2%, but instead the figure merely slowed from a revised 0.9% to 0.3%. The yearly figure only slipped from 3.8% to 3.3% rather than to the predicted 2.3%.
However, while the stronger retail stats supported the Pound on Thursday, economists warned against expecting further strength in the retail sector in the coming months. According to Richard Lim, Chief Executive at Retail Economics:
‘Yesterday’s surprise rise in inflation means real earnings remain under pressure.
Against a backdrop of heightened political and Brexit uncertainly, many households will be more cautious with their spending.’
Euro to Pound (EUR/GBP) Exchange Rate Could Recover if Eurozone PMIs Impress
For now, the Euro to Pound (EUR/GBP) exchange rate is on track to see losses this week. However, if Friday’s Eurozone data impresses or Brexit concerns worsen before markets close for the week, EUR/GBP could still recover.
Friday will see the publication of the week’s most influential Eurozone ecostats. France’s final Q2 Gross Domestic Product (GDP) growth rate will be published, as well as Markit’s September PMI projections for the bloc.
As always, the most influential PMI projections are likely to be Germany’s manufacturing PMI data, as well as the Eurozone’s overall manufacturing, services and composite prints.
Economists are concerned that Eurozone manufacturing activity could be worsening due to US-EU trade jitters. If Eurozone manufacturing activity remains resilient despite the trade uncertainties, the Euro could strengthen.
Britain’s August public sector net borrowing data from August will be published on Friday too, but this is unlikely to be significantly influential. Instead, Brexit news is likely to drive late-week Pound movement.
Any signs that the UK and EU are coming closer to agreements on key issues like the Irish border would bolster Sterling, but the Euro to Pound (EUR/GBP) exchange rate would recover if Brexit jitters worsen again.