- Euro Pound Rate Holds Above 0.84 – Greek debt concerns fade
- UK Trade Deficit Lightens Further than Expected – Helps support Sterling this week
- EUR Update: Eurozone GDP Disappoints – Euro advances regardless
- GBP Forecast: UK Job Data This Week – Strong employment data could support Pound
Demand for the Euro Pound exchange rate faded slightly on Tuesday afternoon.
The morning’s Eurozone growth ecostats finally begun to weigh on EUR trade. An increase in demand for the US Dollar also weakened the Euro.
Federal Reserve Chairwoman Janet Yellen took what some investors saw as a hawkish tone in her testimony on Tuesday. This caused traders to rush into the US Dollar, limiting the Euro’s strength.
Pound investors are hoping for a solid UK jobs report on Wednesday, which could allow the Pound to recover further from Tuesday losses if they impress.
EUR GBP could return to Tuesday’s best levels if they disappoint, however.
[Previously updated 12:35 GMT 14/02/2017]
The Euro Pound exchange rate surged higher on Tuesday, reaching above the key level of 0.85 once again.
The Eurozone’s preliminary Q4 Gross Domestic Product (GDP) results came in below expectations, but demand for the Euro remained solid due to underwhelming UK inflation stats.
Germany’s Q4 GDP slowed from 1.5% to 1.2% year-on-year, missing a projected rise to 1.7%. Quarter-on-quarter growth missed the expected 0.5%, only rising from 0.1% to 0.4%.
As a result of Germany’s slower-than-expected growth rates, the Eurozone bloc’s overall figures also failed to impress.
Eurozone GDP failed to improve to 1.8% year-on-year, remaining at 1.7%.
However, as British inflation also missed projections of 1.9% and only reached 1.8%, market hopes of tighter monetary policy from the Bank of England (BoE) faded and the Pound slumped on Tuesday.
[Previously updated 16:39 GMT 13/02/2017]
Monday’s session did little to change movement in the Euro Pound exchange rate. Underlying weakness in the Euro caused the exchange rate to slip throughout the day.
Tuesday’s session will be vital for Euro Pound trade.
Eurozone Gross Domestic Product (GDP) results from Q4 2016 will be published throughout the morning, including prints from Germany and Italy.
Germany’s finalised January Consumer Price Index (CPI) results will also be published. The Euro Pound exchange rate could recover if these Eurozone reports impress.
GBP traders will be focused on Tuesday’s UK inflation publication. Traders continue to hope that higher than forecast UK inflation will pressure the Bank of England (BoE) into tightening UK monetary policy.
[Previously updated 12:43 GMT 13/02/2017]
The Euro Pound exchange rate slipped on Monday morning. A lack of fresh Eurozone data made it difficult for the shared currency to hold its ground.
Meanwhile, the Pound continued to benefit from last Friday’s strong UK datasets.
Notably, Friday’s UK manufacturing and industrial production prints were so impressive that they influenced higher Q4 Gross Domestic Product (GDP) bets.
Industrial production improved from 2.2% to 4.3% year-on-year in December, while manufacturing production jumped from 1.7% to 4%. These were well above the expected figures of 3.2% and 1.8%, respectively.
[Previously updated 17:38 GMT 12/02/2017]
Could the Euro Pound exchange rate extend its recovery this week?
The EUR GBP currency pair began to recover on Friday after slumping for most of the week as Grexit fears eased and the Pound struggled with key psychological resistance.
EUR GBP lost around a penny in value last week, falling from 0.86 to 0.85. While demand for the Euro improved towards the weekend, Sterling still registered notable gains overall.
Grexit fears took centre stage once again last week, continuing the trend that every few months fears would rise that Greece would have to eject from the Eurozone in order to save its economy from years of crushing debt and austerity.
This time, a row emerged between Eurozone lenders and the International Monetary Fund (IMF) about how to proceed with Greek debt talks. Some even called for Greece to leave the bloc to call off some of its debt.
However, towards the end of the week, investor fears faded slightly and hopes increased that the next step in Greek debt relief would come along smoothly and imminently.
Reuters heard from an unnamed Eurozone official that there was a breakthrough in talks. According to the Reuters report;
‘”There is agreement to present a united front to the Greeks,” a senior euro zone official said, adding that the outcome of Friday’s meeting with the Greeks was still unclear and it was unclear if Athens would accept the proposals.
“What comes out of it, we will see,” the official said.’
Last week also saw the Euro take a hit of concern that nationalist politician Marine Le Pen could win this year’s French Presidential election and take France out of the Eurozone.
Eurozone data was unable to offer the shared currency any notable support throughout the week.
The Pound put in a strong performance last week, advancing for most of the week due to hopes that inflation surges could pressure the Bank of England (BoE) to hike up UK interest rates in the foreseeable future.
Earlier in the week, hawkish comments from Monetary Policy Committee (MPC) member Kristin Forbes left the Pound surging. She indicated she would support an interest rate hike if economic factors remained strong.
However, later in the week it was confirmed that Forbes was actually leaving her role as policymaker after her term ends in June. This caused traders to fear that other MPC members would still be comparatively dovish in the long-term.
As a result of UK interest rate concerns as well as a limited bout of profit-taking from the Pound’s weekly gains, Sterling was unable to benefit from Friday’s impressive UK data.
Britain’s trade balance was projected to lighten slightly in December but came in even lighter than expected, at -£3.30b. November’s figure was revised down from -£4.17b to -£3.56b.
UK industrial production and manufacturing production also beat projections quite strongly in December, while NIESR’s growth estimate for the three months into January was better than predicted at 0.7%.
The Euro is more likely to influence Euro Pound 2017 exchange rate movement in the coming week, as Tuesday will be host to a slew of influential Eurozone ecostats.
Germany’s Q4 Gross Domestic Product (GDP) results will be published as well as Germany’s final January Consumer Price Index (CPI) figures. Italy’s Q4 GDP will follow and then later on the Eurozone’s preliminary Q4 GDP figures will be published.
Other Eurozone data due on Tuesday includes the bloc’s industrial production prints from December, as well as ZEW’s latest economic sentiment surveys for Germany and the Eurozone.
Britain also has a busier data week again, starting out with January’s key CPI report on Tuesday.
If UK inflation comes in above expectations, concerns will increase that the retail sector will suffer from a drop in consumer purchases in 2017 – but Bank of England (BoE) interest rate hike bets may also increase.
The week’s UK data also includes January’s jobless claims figures, as well as the employment report for the three months into December.
As always, developments in Brexit talks and upcoming Eurozone political events will have an influence on the Euro Pound Sterling 2017 exchange rate.