Euro to Pound Exchange Rate Tests Best Levels Following Ifo Confidence Report
Despite the Bank of England’s (BoE) surprisingly hawkish tone last week, the Euro to Pound Sterling (EUR/GBP) exchange rate was able to end the week relatively closely to its best levels as the latest Eurozone data impressed.
After opening last week at the level of 0.8741, EUR/GBP spent most of the week higher thanks to Brexit jitters and easing Italian political jitters making investors happier to buy the Euro (EUR) again.
While the Bank of England decision gave Sterling (GBP) a strong boost on Thursday and pushed EUR/GBP to a low of 0.8730, EUR/GBP recovered thanks to Eurozone data and touched a high of 0.8802 on Friday.
EUR/GBP closed the week at the level of 0.8790 and since markets opened this morning has tested its highs again, thanks to signs that confidence in the Eurozone was improving again.
Sterling investors are hesitant to pile in on Bank of England interest rate hike bets ahead of this week’s data, while the Euro has steadied.
Euro (EUR) Exchange Rates Supported by Signs of Improving Confidence
Demand for the Euro has improved over the past week, partially due to fresh weakness in the US Dollar (USD) and partially due to some surprisingly strong Eurozone ecostats.
The stronger Euro trend continued on Monday, as Ifo’s June German business confidence survey results printed largely above expectations.
Ifo’s business climate figure was forecast to have slipped from 102.2 to 101.7, but instead slipped from a revised 102.3 to 101.8.
Even more impressive was the expectations print, which came in at 98.6 rather than the forecast 98. The previous figure was revised higher from 98.5 to 98.6.
While the current conditions figure fell more than expected to 105.1, the higher climate and expectations prints indicated that businesses were more confident than expected about the economy looking forward.
It followed last week’s Eurozone PMI projections for June, which also largely beat expectations and indicated that the bloc’s economic slowdown may be a little more resilient than thought.
Pound (GBP) Exchange Rates Limp as Investors Await UK Ecostats
Last week’s surprisingly hawkish Bank of England (BoE) policy decision briefly led to a surge in demand for the Pound, but many investors were hesitant to keep buying the currency ahead of this week’s upcoming ecostats.
While markets still highly expect that UK growth slowed significantly in Q1 2018, if the UK growth report falls short of expectations it is likely to make investors even more doubtful about the bank’s current hawkish tone.
Essentially, investors are awaiting some kind of reassurance or green light from this week’s UK data before strengthening Pound positions.
The Bank of England has heavily hinted that it still plans to hike UK interest rates in the coming months, despite signs of slowing UK growth and price pressures.
Currently, markets are betting on an August interest rate hike from the BoE with some analysts speculating there could even be another rate hike towards the end of the year.
Euro to Pound (EUR/GBP) Forecast: Further Eurozone Confidence and UK Growth Figures Ahead
If the current trend of better-than-expected Eurozone confidence and data figures continues, the Euro to Pound (EUR/GBP) exchange rate may have an easier time holding its ground and could even be in for another week of gains.
Investors had become anxious that the Eurozone economic growth would keep slowing and make the European Central Bank (ECB) hesitant to tighten interest rates any time soon.
However, if Eurozone data beats forecasts, ECB interest rate hike bets could rise and the Euro would become more appealing.
Wednesday will see the publication of France’s June consumer confidence figures, followed by Germany’s July consumer confidence survey and June Eurozone confidence figures on Thursday.
Other significant data will be published towards the end of the week which could be even more influential to EUR/GBP.
Germany’s June inflation projections will be published, followed by German retail sales and unemployment on Friday. The Eurozone’s overall June inflation projection will also be published on Friday.
Of course, with Pound investors highly anticipating Britain’s latest growth results before buying the currency, Friday’s session is likely to be a big one for Euro to Pound (EUR/GBP) exchange rate trade.