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Euro to Pound Sterling Exchange Rate Struggles to Sustain Gains despite Stronger Eurozone Data

Euro to Pound Exchange Rate Strength Limited amid European Central Bank (ECB) Jitters

Despite this week’s Eurozone data generally printing higher than markets expected, the Euro to Pound Sterling (EUR/GBP) exchange rate has been unable to sustain much of a recovery this week so far.

Last week saw EUR/GBP plummet, from the level of 0.8681 to close near the level of 0.8605. EUR/GBP trends just below those opening levels at the time of writing today, near the level of 0.8597.

EUR/GBP has been able to hold above last week’s yearly low of 0.8534, but has also been unable to recover much further from those lows.

Demand for the Euro (EUR) found a slight boost yesterday, as the Eurozone’s February services PMIs beat forecasts.

However, due to market demand for safe haven Euro rivals like the US Dollar (USD), as well as European Central Bank (ECB) anticipation, demand for the Euro has been limited versus Sterling (GBP).

Euro (EUR) Exchange Rates Struggle to Firm amid European Central Bank (ECB) Uncertainty

Demand for the Euro was limited today, despite the brief jump in Euro demand that followed yesterday’s strong Eurozone ecostats.

Markit’s final February services and composite PMI figures beat forecasts in many key prints, with German services rebounding to a solid 55.3 and Eurozone services rising to 52.8 overall.

While other concerns about Eurozone business activity and price pressures persisted, these stats helped to boost confidence that the Eurozone economy was seeing a positive shift.

It was followed by the Eurozone’s January retail sales results, which also beat forecasts. The yearly figure jumped from 0.3% to 2.2%.

However, analysts are anxious that the European Central Bank (ECB) could use its policy decision tomorrow to indicate that it will not hike Eurozone interest rates at all this year amid the slowing global economic outlook.

Speculation of a more dovish ECB weighed on the Euro and prevented it from climbing versus the Pound today.

Pound (GBP) Exchange Rate Demand Limited amid Brexit Uncertainties

Higher hopes that the UK government’s Brexit plan was seeing stronger support were short-lived this week, and as a result the Pound’s potential for further gains on last week’s rally have been limited.

The Shadow Chancellor of the opposition Labour Party, John McDonnell, said that not many MPs in the Labour Party would vote in favour of the government’s Brexit plan during a meaningful vote next week.

As hopes for the government’s Brexit plan to pass lightened, investors took the opportunity to sell the Pound from its recent best levels in a bout of profit taking.

This came despite yesterday’s UK services PMI beating expectations. While the print beat forecasts, the data did little to soften concerns that Britain’s economic growth would near stagnation in Q1 2019.

Euro to Pound (EUR/GBP) Exchange Rate Investors Anticipate European Central Bank (ECB) Decision

Thursday is likely to be this week’s most influential session for Euro investors and could cause some notable movement in the Euro to Pound (EUR/GBP) exchange rate.

The Eurozone’s latest Q4 Gross Domestic Product (GDP) growth rate projections will be published and are expected to show that yearly growth slowed near the end of 2018.

It will be followed by the European Central Bank’s (ECB) March policy decision, which could be the most influential event for the Euro this week depending on the tone policymakers take.

Analysts are concerned that the ECB will take a more dovish tone and hint that it will not hike Eurozone interest rates at all this year.

If the bank does hint that it will leave rates frozen for even longer, the Euro could be in for further weakness.

As Pound investors anticipate next Monday’s key UK Parliament Brexit vote, the Euro to Pound (EUR/GBP) exchange rate is likely to be driven by Thursday’s Eurozone news.