Euro Sturdies against Jittery Pound as Brexit Uncertainties Persist
Despite a lack of strong support for the Euro (EUR) this week so far, the Euro to Pound Sterling (EUR/GBP) exchange rate has seen multiple attempts to climb away from its worst levels in years. Investors are eagerly awaiting more key data due later in the week.
Due to the Pound’s (GBP) strong surge last week, EUR/GBP slumped from 0.8492 to 0.8300.
EUR/GBP has been unable to move too far from those levels this week so far, and even briefly touched on a low of 0.8285 yesterday. This was the worst level for the pair since the aftermath of the Brexit vote in 2016.
Sterling weakness today is making it easier for EUR/GBP to recover slightly. At the time of writing, EUR/GBP trends closer to the level of 0.8330.
Losses are more due to investors selling the Pound than resilience in the Euro. The Euro is still unappealing overall this week.
Euro (EUR) Exchange Rates Lack Drive as Eurozone Data Continues to Disappoint
The Euro is climbing back from its worst levels against the Pound today, but this is largely due to investors selling the Pound than it is Euro strength.
Markets have had little reason to buy the Euro this week due to lasting concerns about the Eurozone’s economic outlook and the possibility of a lasting slowdown.
Support remains fairly weak overall, as this week’s Eurozone data has not been strong enough to keep investors hopeful for an economic rebound.
Yesterday’s poor ZEW economic sentiment survey stats continue to weigh, and today’s Eurozone construction output report saw a surprisingly deep contraction.
According to analysts from Rabobank:
‘the EUR is currently being bogged down by the market’s reassessment of the German economic outlook.
… With a lot of bad news priced in, the EUR would likely be sensitive to better news either on the domestic Eurozone economy or about the coronavirus.’
Pound (GBP) Exchange Rates Slide as Brexit Uncertainties Persist
For much of the week so far, investors have been selling the Pound slightly from its best levels in profit-taking. With the Pound near its best levels in years against the Euro, investors are taking profit from its high levels.
However, UK data and hopes for a strong economic rebound have been helping the currency to hold its ground and avoid losses.
For example, next month’s UK budget is increasingly expected to see new Chancellor Rishi Sunak introduce higher government spending which could boost economic activity.
On top of this, inflation and job stats published in recent sessions were strong overall and kept investors optimistic about Britain’s outlook.
However, while these factors are keeping Pound losses limited, uncertainties over UK-EU Brexit tensions continue to weigh as well. These kept the Pound under pressure today.
According to Stephen Gallo, European Head of FX Strategy at BMO Capital:
‘There’s limited weakness in the Pound but I would fade (sell into) rallies in Euro-Sterling for the time being,’
Euro to Pound (EUR/GBP) Exchange Rate Awaits Key Data Later in the Week
This week’s data so far has failed to give investors much reason to buy the Euro, but if upcoming Eurozone data shows stronger signs of recovery that could change.
Tomorrow will see the publication of German and Eurozone consumer confidence, as well as French inflation. However, investors are even more likely to await Friday’s session, when key Eurozone PMI projections for this month will be published.
The PMI projections will give investors a good idea of how the Eurozone is performing this month. Markets will keep a close eye on signs of economic recovery, and if the data impresses investors it could boost the Euro again.
On the other hand though, continued weakness in Eurozone data would make it more difficult for EUR/GBP to mount a solid recovery.
It’s also possible that Sterling (GBP) could see further strength if upcoming UK data beats market expectations.
Key UK retail sales tomorrow and PMI projections on Friday could also cause some Euro to Pound (EUR/GBP) exchange rate movement.