On Thursday the European Bank will gather and deliver its highly-anticipated policy decision.
Up until last week industry experts were betting that the central bank would introduce additional easing measures in order to shore up the Eurozone’s fragile economic recovery.
However, after inflation data for the 18-nation currency bloc surprised to the upside, the odds of ECB intervention dipped.
In the view of senior economist Martin van Vliet; ‘The data flow hasn’t deteriorated enough to justify action. There is no clear sign of improvement in the monetary and credit situation but inflation hasn’t really changed and economic sentiment indicators and GDP data do suggest a strengthening of economic activity.’
As the likelihood of the ECB cutting rates beyond current record lows deteriorated the Euro recovered ground against several of its rivals.
Today the Euro received additional support as measures of manufacturing output for the Eurozone and its largest economies beat their flash estimates.
For example, final German manufacturing PMI came in at 54.8, slightly stronger than the 54.7 reading expected.
The German data showed sharp increases in production and new orders with a third month of increasing employment.
Comments issued by Markit with the data noted that the survey provides ‘further positive news for Germany’s goods producing sector. Manufacturing continued to grow at a solid, albeit slower pace in February […] Sustaining the economic upturn in coming months is the key, and with companies reporting strong expansions in new orders and export sales, the sector looks set for further growth in the near future. Encouragingly, companies continued to take on additional staff, which signals confidence about future workloads.’
Today EUR/GBP gains were limited as the Pound also advanced on its rivals thanks to upbeat British manufacturing data.
We forecast that the EUR/GBP pairing will experience considerable movement over the next few days as influential economic reports are released and investors dwell on Thursday’s central bank decisions.
While tomorrow’s Eurozone producer price index will be of interest, EUR/GBP movement is more likely to be driven by UK construction data.
On Wednesday UK services figures will have an impact, but Eurozone services, retail sales and growth reports may all trigger volatility.
Both the ECB and Bank of England are scheduled to deliver their rate decisions on Thursday, and in a data-heavy week investors will also be looking to Friday’s US non-farm payrolls report for guidance regarding future currency trends.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.3779 ,
Euro,,British Pound,0.8237 ,
Euro,,New Zealand Dollar,1.6482,