As the week progressed the Euro Pound exchange rate continued its run of losses, with the pairing shedding around 0.8% on Wednesday to hit a low of 0.8481.
The Pound was trending higher across the board amid growing speculation that the initial impact of the Brexit on the UK’s economic outlook wasn’t as bad as feared.
- Euro Pound Exchange Rate Forecast to Surpass 0.87 – If Eurozone figures continue solid trend
- Is the Pound (GBP) Rally Already Over? – Sterling drops again on Article 50 speculation
- Update: Eurozone PMIs in Focus – August figures mixed, consumer confidence down
- Forecast: Quiet UK Eco Calendar Ahead – Friday’s UK GDP data from before Brexit vote
More Gains for Sterling, EUR GBP Exchange Rate Lower
With the Pound enjoying a fairly broad-based rally on Wednesday, the EUR GBP exchange rate dipped below the 0.85 level.
Germany’s as-forecast growth data had little impact on the pairing but Thursday’s German IFO reports and UK CBI stats may inspire some Euro Pound fluctuations as the end of the week approaches.
(Previously updated 23/08/2016)
Euro Pound Exchange Rate Forecast to Slip Until Positive Eurozone News
The Euro to Pound exchange rate fell even lower from its best levels on Tuesday afternoon, as the Pound continued to be bought from its cheapest levels and the Euro was weakened by mixed ecostats. If data from the currency bloc should start to show a deterioration in the Eurozone’s economic outlook, bets of additional stimulus being introduced may begin weighing on EUR/GBP. The Euro is also likely to weaken against peers like the US Dollar in the wake of such an eventuality.
While German PMIs disappointed markets this morning, the Eurozone’s overall PMIs showed improved growth throughout the currency bloc.
This was enough to cause Markit Chief Economist Chris Williamson to predict that the European Central Bank (ECB) would not be in a hurry to introduce further stimulus yet. However, the door would be left open as growth remained slow.
The Euro was weakened further following the publication of August’s Eurozone consumer confidence report. Analysts had projected a slight rebound of confidence, but the figure instead worsened from -7.9 to -8.5.
Amid a lack of supportive Eurozone data, the shared currency could continue to slip on Wednesday unless Germany’s final Q2 growth figures beat preliminary results.
(Previously updated 10:10 23/08/2016)
EUR GBP Drops Back to 0.85
With August PMIs for the Eurozone and its largest economies yielding mixed results, the Euro Pound exchange rate edged slightly lower on Tuesday, dipping below the 0.86 level.
The Manufacturing, Services and Composite indexes for the Eurozone as a whole beat expectations but the data for Germany came in below forecasts.
The German composite gauge had been expected to ease from 55.3 to 55.1 but actually tumbled to 54.4.
The UK’s CBI data and Eurozone Consumer Confidence index could prompt more Euro Pound movement as the European session continues.
(Previously updated 09:00 23/08/2016)
The Eurozone’s bustling economic calendar will be the catalyst driving this week’s Euro Pound exchange rate forecast. Sterling may have a difficult time holding the Euro down, as GBP EUR trended limply with a downward bias even after last week’s strong UK retail sales report.
While the sales data initially boosted Pound (GBP) exchange rates across the board, concerns relating to the timeline of when Article 50 would be enacted (which would trigger the UK’s exit from the European Union) later saw Sterling reverse its advance.
Euro Pound Exchange Rate Forecast to Surge if PMIs Beat Expectations
The EUR/GBP exchange rate headed back towards the week’s opening levels on Monday afternoon as markets lacked the drive to buy the Pound back up to last week’s best levels.
While Friday’s selloff was largely mistaken, the Pound’s low yield and a relatively empty UK economic calendar for the coming week meant that investors didn’t see much reason to buy into the currency on Monday.
This meant that its recovery was limited, and EUR/GBP remained comfortably above the key level of 0.86. The pair trended in the region of 0.8630 on Monday afternoon.
The Eurozone’s PMIs have great potential to influence the Euro to Pound exchange rate if they fail to meet expectations in some way.
As these are the first economic figures for the Eurozone collected in August, they could set the tone for Euro trade for the month to come. Better-than-expected PMI scores are likely to send the Euro higher, especially if these scores indicate that growth is improving rather than slowing.
As it stands, Germany’s composite PMI is expected to dip slightly from 55.3 to 55.1, the Eurozone’s Composite gauge is believed to have fallen from 53.2 to 53.1 and the French index is forecast to have improved from 50.1 to 50.4.
(Previously updated 14:33 BST 22/08/2016)
Euro Pound Exchange Rate Forecast to Fluctuate Lower Until Tuesday
The Euro slipped over 0.4% against the Pound on Monday morning, as investors returned to the Pound following Friday’s Article 50-inspired selloff.
As UK officials quickly disregarded the validity of the report on Friday afternoon, investors began to take the Pound higher on Friday. This bought EUR/GBP a little closer to Friday morning’s low levels.
Monday’s session is light on key data for the Eurozone or Britain, meaning the Euro to Pound exchange rate’s movement is unlikely to shift too much until Tuesday’s Eurozone PMIs are published.
(Previously updated 10:40 BST 22/08/2016)
The Euro Pound (EUR/GBP) exchange rate began last week at the level of 0.8633, and advanced to a three-year-high of 0.8716 on Tuesday before optimistic UK data dragged the pair to a weekly low of 0.8594 on Thursday. On Friday afternoon, Sterling saw a drop off of demand, allowing the Euro to advance back towards levels above 0.8650.
The Pound had previously rallied against the Euro on the back of the UK’s unexpectedly upbeat retail sales report, a sign that the UK’s economy had weathered the initial Brexit shock better than forecast. As more post-referendum data emerges it will be interesting to see which UK sectors have shown the most resilience.
Euro (EUR) Sturdy as Eurozone Avoids Deflation
While there may not have been enough strong Eurozone data to keep the Euro advancing across the board last week, its current demand was still enough to see it end the week higher against many majors, including Sterling.
The shared currency’s uptrend was boosted slightly by the week’s economic data. While nothing overly impressive or influential, Monday’s improved economic sentiment surveys and Thursday’s Consumer Price Index (CPI) report kept the Euro afloat.
According to the CPI report, Eurozone inflation had worsened by -0.6% from June to July, but the yearly inflation figure came in at 0.2%. Not too high a score, but the highest inflation figure in eight months was enough to cheer some investors.
The Financial Times wrapped up the Euro’s movement last week;
‘The Euro is enjoying its best run in three months, bouncing back to hit post-Brexit vote highs this week. …
Having strengthened for five straight sessions before today, the single currency could even hit $1.16 against the dollar by the end of the year, says Daniel Waldman at UBS.’
The UBS also stated that the Eurozone’s growth rate had actually surpassed the US’ since Q1 2016, and that the Euro had become increasingly immune to political pressure, recovering from its huge Brexit-inspired plummet in just two months.
Pound (GBP) Loses Ground amid Article 50 Speculation
Article 50 – that is, the method to formally begin an ‘exit’ from the European Union – has been a point of semi-regular speculation and concern in Britain since the nation voted to Brexit in late-June.
The Brexit vote itself does not cause the UK to begin the leaving process, rather the leader of the country needs to activate ‘Article 50’ of the Lisbon Treaty (the treaty that formed the European Union).
There had recently been speculation that UK Prime Minister Theresa May would not invoke Article 50 until the end of 2017 or later, causing frustration among Brexit campaigners.
However, according to a report from Bloomberg, two unnamed British officials have claimed that May currently intends to begin the Brexit process in early 2017 – before April.
‘She (May) is sympathetic to the case for acting by April at the latest as Germany and France prepare for elections and pro-Brexit campaigners at home warn against delay, said the officials, who asked not to be named discussing private conversations.
The Pound dropped the most in two weeks on the news. Sterling fell against all of its 16 major peers, paring a weekly advance against the dollar. It declined 1 percent to $1.3042 as of 3 p.m. London time, the steepest since Aug. 4.’
Not only did Sterling drop on the news, but it quickly reversed many of its weekly gains against some majors – including the Euro.
Sterling recovered slightly later on Friday as this report was claimed to be false by Downing Street officials, but struggled to regain all its lost ground as the week drew to an end.
The Pound had soared across the board on Thursday thanks to a surprisingly positive retail sales report, which revealed that sales soared in July thanks to hot weather and an influx of tourist purchases. This news was unable to keep Sterling buoyed however, as the currency was easily undermined on Friday.
Euro Pound Exchange Rate Forecast: Eurozone PMIs will Drive EUR/GBP
The Euro could continue to take the lead in EUR/GBP movement next week, as the Pound will continue to trend limply amid concerns of further Bank of England (BoE) easing and Article 50 speculation.
It had been a while since there was any indication of when the Brexit process will begin, but Friday’s session served as a reminder that UK markets are sensitive to speculation about Article 50 being invoked.
Britain’s own economic calendar will be relatively quiet for the duration of the week, with Friday’s Q2 growth figures unlikely to cause considerable movement as data collected before the Brexit vote is sometimes perceived as being irrelevant to Britain’s economic movement since July.
As a result, the Euro is in a position to easily drive EUR/GBP movement next week. The Eurozone’s preliminary August PMIs will be watched closely by markets when they are published on Tuesday.
July’s Eurozone PMIs impressed by indicating that the Eurozone’s economy had not been derailed by Brexit vote jitters. If August’s scores continue this trend, the Euro will remain sturdy throughout the week. However, poor PMIs could cause the Euro to plummet, and European Central Bank (ECB) easing bets to increase.
Markit economist Chris Williamson said of the July figures; ‘A welcome uptick in the final PMI numbers presents a slightly better picture than the slowing signalled by the earlier flash reading, and is especially encouraging as it suggests the region saw little overall contagion from the UK’s ‘Brexit’ vote. However, the survey is still indicating only a modest 0.3% quarterly rate of economic growth at the start of the third quarter. Such a meagre pace of expansion will inevitably fuel speculation about what the ECB could and should do to boost growth, and when.’
Other key Eurozone figures throughout the week, including Eurozone consumer confidence, German Q2 growth figures and IFO’s latest German business report could also influence the Euro Pound exchange rate forecast throughout the week.