Euro to Pound Exchange Rate Sustains Gains Following UK Growth Disappointment
Despite a lack of supportive factors in Euro (EUR) trade on Monday, the Euro to Pound (EUR/GBP) exchange rate continued to hold the gains it made last Friday as the Pound (GBP) remained unappealing.
Last week was a major one for the EUR/GBP outlook, particularly Sterling trade. Bank of England (BoE) interest rate hike bets helped push EUR/GBP from the week’s opening levels of 0.8778 to Friday’s lows of 0.8686.
However, following the publication of Britain’s latest growth projections, EUR/GBP surged and ended the week near a month and a half high of 0.8820. EUR/GBP continued to trend near this high at the time of writing on Monday.
As UK growth came in well short of expectations, investors became concerned that Britain’s economy was not as resilient as hoped amid the Brexit process. This caused BoE interest rate hike bets to plunge.
Euro (EUR) Exchange Rate Strength Limited by Underwhelming Eurozone Datasets
Demand for the Euro has been limited in recent weeks as Eurozone data continues to indicate that the European Central Bank’s (ECB) cautious tone on monetary policy is unlikely to change any time soon.
In the bank’s April policy decision last week, ECB President Mario Draghi acknowledged that the Eurozone’s economic growth was slowing quicker than expected, but asserted that it remained solid and broad-based.
With the ECB outlook unchanged, investors are unlikely to rush into the Euro again unless there is another trend of stronger-than-expected Eurozone data.
As a result, Monday’s Eurozone data likely didn’t have an impact on the Euro outlook.
Germany’s March retail sales results were mixed. Monthly sales unexpectedly contracted at -0.6%, but the yearly figure beat 1% forecasts by remaining at 1.3%.
Italy’s April inflation projection was disappointing though, sliding to just 0.1% month-on-month and 0.5% year-on-year.
Pound (GBP) Exchange Rates Pressured by Political Uncertainties
Pound investors await further UK ecostats following last week’s disappointing UK growth projections, which caused Bank of England (BoE) interest rate hike bets to fall and the Pound to slump.
Sterling has seen little support, with Bank of England interest rate hike bets unwinding and UK data failing to impress.
On top of economic disappointment, the Pound is seeing additional pressure from political news so far this week.
Now ex-UK Home Secretary Amber Rudd resigned on Sunday, following mounting pressure over the way she handled the Windrush scandal.
She became the fourth person to resign from a UK cabinet job in the past six months and this worsened perceived political uncertainty.
Rudd was replaced on Monday by Sajid Javid, which helped Sterling to recover slightly from its worst levels.
Euro to Pound (EUR/GBP) Forecast: Slews of Eurozone Data Ahead
UK manufacturing PMI data will be published on Tuesday, followed by construction on Wednesday and the key UK services print on Thursday.
As services make up a notable chunk of Britain’s economic activity, this report could boost Pound trade if it impresses.
However, unless upcoming UK PMI data is particularly impressive and influences Bank of England (BoE) interest rate hike bets, the Euro is more likely to drive Euro to Pound (EUR/GBP) exchange rate movement this week.
A lot of highly influential Eurozone data will be published this week, especially from Wednesday through Friday.
Wednesday will see the publication of the Eurozone’s Q1 growth projections and March unemployment rate.
The Eurozone’s April inflation projections will be published on Thursday and could influence European Central Bank (ECB) bets if they surprise investors.
Lastly, the Eurozone’s final April PMIs and March’s Eurozone retail sales results will be published on Friday.
If upcoming Eurozone data impresses investors, the Euro to Pound (EUR/GBP) exchange rate could continue to climb – but disappointing Eurozone stats could instead cause EUR/GBP to shed some of its recent gains.