Euro to Pound Exchange Rate Pressured by Latest UK Services Results
Tuesday saw the Euro to Pound Sterling (EUR/GBP) exchange rate holding the ground near its best weekly levels, ahead of the publication of Britain’s key services PMI report. The Euro (EUR) was benefitting from fading Italian political concerns.
Last week saw EUR/GBP slip from 0.8762 to 0.8737. It quickly recovered those losses during Monday’s session when it climbed to highs near 0.8789. Following the publication of Britain’s latest services PMI, EUR/GBP was slipping and at the time of writing trended nearer 0.8765.
Demand for the Euro has generally improved since the end of last week, despite some mixed Eurozone ecostats. This has been due to lightening concerns about Eurozone politics, with things in both Italy and Spain looking to calm down.
Sterling (GBP), on the other hand, has seen mixed performance. The British currency has been supported by some domestic UK ecostats, but Brexit uncertainties persist and have limited its strength.
Euro (EUR) Exchange Rates Recover as Italian Political Jitters Recede
Amid a lack of fresh influential domestic ecostats, investors have been buying the Euro back up from the lows it saw last week as concerns about Eurozone politics fade.
The Euro slumped at the end of May as Italy’s already controversial populist coalition seemingly failed to form a government, paving the way for further Italian elections within the next year.
Concerns that another Italian election would amount to a referendum on Italy’s Eurozone membership sent markets into a brief panic.
However, the panic was short-lived as the coalition eventually successfully formed a government. While concerns about the populist coalition remain, ‘Italexit’ fears have largely subsided for now.
Monday’s reports that Eurozone investor confidence had fallen on political jitters limited the Euro’s recovery slightly, but with the political jitters lightening anyway markets hoped that confidence would improve again too.
Pound (GBP) Exchange Rates Bolstered as UK Services PMI Beats Forecasts
Supported by some better-than-expected UK ecostats since last week, the Pound’s losses against the Euro have been limited.
Still, the Pound’s strength has been limited too as Brexit uncertainties have persisted and kept pressure on the British currency.
According to Ken Odeluga from City Index, investors are concerned that Britain’s government is struggling to break deadlocks in Brexit talks:
‘Scepticism that Downing Street will have proposals in place by an EU summit in June weighed on Sterling, amid a weekend of ‘doomsday scenario’ reports,’
On Tuesday, Britain’s May services PMI from Markit was published and beat expectations.
The figure was forecast to have improved just slightly, from 52.8 to 53, but instead jumped to 54. This bolstered Sterling support slightly, but the British currency’s strength remained pressured by Brexit uncertainties.
Euro to Pound (EUR/GBP) Forecast: Eurozone Growth in Focus
With Eurozone political jitters continuing to ease, Euro to Pound (EUR/GBP) exchange rate trade could become more data driven for the remainder of the week.
Following the notable dataset publications today, Wednesday will be a little quieter. The Eurozone’s May retail PMI or Germany’s May construction PMI could influence the Euro slightly however.
The week’s most influential Eurozone stats will be published on Thursday. The Eurozone’s third Q1 Gross Domestic Product (GDP) estimates will be the most accurate results before the final figures come in and are likely to cause Euro movement if they surprise.
Eurozone growth is currently projected to have slowed from 0.7% to 0.4% quarter-on-quarter, and from 2.8% to 2.5% year-on-year.
If the growth projection comes in higher than expected, the Eurozone’s growth outlook may improve and the Euro would strengthen. A weaker growth figure would make it easier for Sterling to climb however.
German factory orders from April will also be published on Thursday, with German trade balance and industrial production stats following on Friday.
As for Sterling, Euro to Pound (EUR/GBP) exchange rate traders will now look to potential Brexit developments, or anticipate next week’s key UK unemployment and inflation reports.