The Euro (EUR) was holding onto gains against the Pound (GBP) on Wednesday as the single currency found support from news that a peace deal could be reached between Ukraine and Pro-Russian rebels by Friday.
Initial reports that a permanent ceasefire had been agreed to were soon dismissed but hopes for peace remained in place after Russian President Vladimir Putin said that he was hoping that a peace deal could be reached by the end of the week.
Following the announcement the Euro strengthened and eased away from a session low against the US Dollar (USD). The currency was able to advance as concerns that sanctions imposed against Russia would drag on the global economy softened.
The single currency was able to advance despite data released earlier in the session showed that the German service sector slowed and the French and Italian sectors contracted.
The data increases pressure on the European Central Bank to introduce new monetary easing measures on Thursday.
Adding to the run of disappointing data was a separate report, which showed that retail sales across the 18-member single currency bloc dropped again in July. Data released by Eurostat showed that retail sales slowed sharply and dropped by 0.4% in July, matching economist expectations.
‘July’s 0.4% drop in Eurozone retail sales volumes fuels concern that recently weakening consumer confidence across the Eurozone is starting to lead to increased caution in spending, thereby harming growth prospects,’ said Howard Archer, an economist at IHS Global Insight.
Earlier in the session, the Pound had managed to regain some lost ground due to the publication of the latest UK Services PMI data.
The PMI compiled by Markit showed that activity in the UK’s dominant service sector increased to a 10-month high of 60.5 in August. Up from the preceding month’s figure of 59.1 and was better than the 58.5 figure expected by economists.
Despite the strong data, Sterling was unable to make much in the way of gains as economists grow concern that the UK recovery is being more dependent on the service sector, casting some doubt on whether the Bank of England will raise interest rates.
‘The data send mixed signals to policy makers, suggesting the debate over whether the economy can withstand higher interest rates will remain intense. Policy makers will certainly be concerned by the extent of the slowdown in manufacturing and will be eager to see whether the global economic uncertainty caused by the Ukraine crisis will also filter through to a significant slowdown in services and construction. Some impact is already evident, with growth of new orders moderating in all three sectors in August,’ said Makit’s chief economist Chris Williamson.
Also weighing on the Pound are concerns over the outcome of the upcoming Scottish Independence vote.
Euro Exchange Rate News:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.3142 ,
Euro,,British Pound,0.7983 ,
Euro,,Canadian Dollar,1.4342 ,
Euro,,Australian Dollar,1.4074 ,