Euro to Pound Exchange Rate Sees Further Losses on Disappointing Eurozone Stats
As last week’s Eurozone data failed to give investors much reason to buy the Euro and global trade uncertainties weighed on Eurozone markets, the Euro to Pound (EUR/GBP) exchange rate spent most of the week falling.
EUR/GBP opened last week at the level of 0.8794 and shed over half a pence, closing the week at the level of 0.8720.
Since markets opened this week, EUR/GBP has continued to tumble and at the time of writing was trending near a half-year low of 0.8699. This was the first time EUR/GBP had dipped below 0.87 since June 2017.
The Pound (GBP) has remained appealing on Brexit speculation and Bank of England (BoE) interest rate hike bets, helping it to easily gain against a Euro (EUR) weakened by underwhelming domestic data.
Euro (EUR) Exchange Rates Slip as Eurozone Trade Concerns Worsen
Monday morning saw the publication of German’s February trade balance results, which showed disappointing drops in both imports and exports.
Analysts noted that this was the weakest New Year for German trade since 2009 – and comes amid the possibility of the US Presidential administration implementing strict trade tariffs on US imports.
German imports slumped from -0.5% to -1.3%, well below the expected rise to 0.3%, while exports plunged from -0.5% to -3.2% and nowhere near the forecast 0.2%.
According to Carsten Brzeski from ING Bank;
These days, talking about trade means talking about Trump and tariffs. In Germany, these talks have caused quite some goose bumps. Rightly so. In 2017, the US was Germany’s largest export partner. The bilateral trade surplus amounted to more than 50bn Euro, with vehicles and machinery recording the largest bilateral surplus. At the same time, Germany runs a significant trade deficit with the US in agricultural products. The only comforting factor for Germany is that it has a very diversified export sector, particularly in terms of geographic diversification.
The data worsened market concerns that Germany, the Eurozone’s biggest economy, could be hit by US trade protectionism unless the Eurozone is able to secure exemption from the strict trade tariffs.
It followed last week’s disappointing Eurozone retail sales stats from February, as well as mixed inflation figures doing little to boost market speculation that the European Central Bank (ECB) would be taking a more hawkish tone on monetary policy any time soon.
Pound (GBP) Exchange Rate Gains despite Mixed UK Data
UK data has done little to inspire Pound investors since the beginning of April.
Last week’s UK PMI data from March indicated that Britain’s economy was not performing as strongly as expected last month, due partially to surprisingly poor weather muting consumer activity.
Still, the British currency has been supported regardless thanks to hopes that the Brexit process will go smoothly, and anticipation for a predicted Bank of England (BoE) interest rate hike in May.
In March, the UK government was finally able to reach an agreement with the EU on the terms of a post-Brexit transition period, which bolstered confidence that the UK would be able to avoid a ‘cliff-edge’ hard Brexit scenario.
On Monday morning, strong UK housing stats from March were published by Halifax, which helped Sterling to gain against the Euro at the beginning of the week.
Euro to Pound (EUR/GBP) Forecast: Germany’s Final March Inflation Figures Ahead
Most of this week’s Eurozone economic data is unlikely to be particularly influential, but investors are unlikely to buy the Euro again unless data indicates that the European Central Bank (ECB) is more likely to take a more hawkish tone.
As a result, the biggest focus will likely be on final March Consumer Price Index (CPI) results due towards the end of the week.
France’s final March inflation results will be published on Thursday, followed by German and Spanish inflation figures on Friday.
Eurozone industrial production and trade balance figures will also be published towards the end of the week.
Amid a lack of particularly influential UK ecostats due for publication throughout the week, EUR/GBP is more likely to be driven by Euro movement, unless there are any surprising Brexit developments.
Wednesday’s UK trade or production stats may influence EUR/GBP if the results surprise investors though.