- Euro Pound Exchange Rate Flat Near 0.88 – Pair fails to hold this week’s highs
- Euro Unchanged Despite Strong German Inflation – Spanish inflation disappoints
- Eurozone CPI Mixed – Inflation slows, but beats expectations in June
- Forecast: UK PMIs Due Next Week – Services stats could affect BoE bets
Euro Pound Fails to Advance Despite Solid Eurozone Data
This week’s optimistic Eurozone data was unable to help the Euro Pound exchange rate hold near its best 2017 levels, as higher Bank of England (BoE) tightening bets strengthened the Pound.
However, EUR GBP is far higher at the end of Q2 2017 than it was at the end of Q1. The pair has climbed from around 0.8500 to around 0.8800 since the beginning of April.
The market focus next week will be Britain’s June PMIs from Markit. Any political or Brexit developments in Britain also have the potential to influence Pound exchange rates.
If UK services stats disappoint investors and cause a drop in BoE monetary tightening bets, the Euro Pound exchange rate could advance towards its best 2017 levels again.
[Previously updated 12:48 BST 30/06/2017]
Despite a week of mostly impressive data from the Eurozone, the Euro Pound exchange rate has been unable to hold its best levels and instead trends flatly near the week’s opening levels of 0.8800.
The strength of the Pound this week due to Bank of England (BoE) policy tightening bets led EUR GBP to briefly dip to a weekly low of 0.8765 on Friday morning, but strong Eurozone data prevented the Pound from holding these highs.
Friday’s Eurozone data helped the shared currency to hold its ground. The Eurozone’s year-on-year June projection beat market expectations by only slipping from 1.4% to 1.3% rather than the forecast 1.2%.
Germany’s retail sales stats from May came in well above expectations, but June’s German unemployment data was slightly disappointing.
[Published 07:00 BST 30/06/2017]
The Euro Pound exchange rate continued to trend flatly for most of Thursday due to a lack of surprising data or political developments. Euro traders were unfazed by the day’s mixed inflation stats and await Friday’s key data.
This week has seen big, but temporary, EUR GBP movement. Despite soaring to a 2017 high of 0.8879 in the middle of the week, the pair dropped on Wednesday afternoon and has trended in a tight region near the week’s opening levels of 0.8800 since then.
Euro (EUR) Flat Despite Higher German Inflation Projection
The Euro was unable to advance against the Pound on Thursday despite some optimistic Eurozone data, as Sterling continued to benefit from this week’s central bank news.
The main event for Euro traders on Thursday was a slew of typically influential Eurozone ecostats. However, while the data was largely impressive the Euro saw flat performance.
Most notably, Germany’s June Consumer Price Index (CPI) projections beat expectations. The month-on-month print was expected to improve from -0.2% to 0% but climbed to 0.2%. Meanwhile the year-on-year print was forecast to slip from 1.5% to 1.4% but actually improved to 1.6%.
However, as Spain and Italy’s inflation projections disappointed traders, they largely overlooked the German inflation stats.
Thursday’s other Eurozone data all beat expectations. GfK’s German consumer confidence report improved from 10.4 to 10.6, while the Eurozone’s June business confidence surveys also impressed.
Business confidence climbed from 0.9 to 1.15, industrial sentiment from 2.8 to 4.5, services sentiment from 13 to 13.4 and economic sentiment from 109.2 to 111.1.
The Euro ultimately failed to gain against the Pound due to Sterling’s own strength, as well as lingering market disappointment from this week’s European Central Bank (ECB) news.
What had been perceived by markets as a notably hawkish speech from ECB President Mario Draghi was actually more cautious, according to sources close to the ECB.
Draghi had allegedly intended to prepare markets for the possibility that a decision could be made on adjusting its quantitative easing (QE) package soon, not to indicate a commitment to one.
One source told Reuters;
‘My takeaway from the Draghi speech is that a decision in September is possible but not certain’
Pound (GBP) Remains Sturdy amid Rising BoE Tightening Hopes
The Pound continued to perform generally strongly on Thursday following this week’s surprising comments from Bank of England (BoE) Governor Mark Carney.
Carney indicated at the ECB Forum in Portugal that it may be necessary for the BoE to withdraw its monetary stimulus policies in the foreseeable future depending on the strength of UK ecostats in the coming months, as well as how the Brexit process progresses.
Analysts suggested that investors may have overlooked the caveats in Carney’s speech, as he warned on wage growth performance being of particular importance in regards to withdrawing monetary stimulus.
Regardless, as this was the biggest sign of hawkishness from Carney since the aggressive stimulus program was introduced in August 2016, investors bought up the Pound and BoE tightening bets increased.
The Pound was little affected by May’s BoE consumer credit report, despite it coming in at £1,732m rather than the forecast $1,400m.
Euro Pound Forecast: Slew of Eurozone Ecostats in Focus
Friday will see the publication of most of this week’s key Eurozone data. As investors are more likely to have digested this week’s mixed European Central Bank (ECB) news by then, Euro Pound movement could be influenced.
The biggest publication of the day will be the Eurozone’s preliminary June inflation results, which are forecast to slow from 1.4% to 1.2%.
If they come in below expectations, EUR GBP could end the week slightly lower. If they impress however, the pair could advance towards the end of the week.
Friday will also see the publication of other key Eurozone ecostats, such as France’s preliminary June inflation figures, German retail sales from May and German unemployment stats from June.
However, if Pound sentiment remains strong or gets a late-week boost, the day’s Eurozone data may not have a notable effect on Euro Pound exchange rate movement.
Sterling demand could improve if Britain’s final Q1 Gross Domestic Product (GDP) results beat expectations. Analysts currently predict growth will slow from 0.7% to 0.2% quarter-on-quarter but improve from 1.9% to 2% year-on-year.
As it stands, unless Friday data surprises investors the Euro Pound exchange rate is likely to end the week relatively close to the week’s opening levels.