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Eurozone Growth Keeps GBP EUR Exchange Rate Largely Flat for First Half of Week

  • GBP EUR Exchange Rate Struggles to Reach 1.12 – Remains in 1.11 region
  • Eurozone Inflation Meets Expectations – Euro holds ground on Monday
  • Eurozone Growth Meets Expectations – Analysts optimistic
  • GBP Forecast: Bank of England Meeting in Focus – Markit’s UK PMIs also anticipated

Updated 16:56 BST 02/08/2017:

GBP EUR Fluctuates Near Week’s Opening Levels

Sterling failed to hold any gains throughout Wednesday’s European session either as the morning’s disappointing UK construction PMI kept pressure on GBP EUR.

The GBP EUR exchange rate currently trends just below the week’s opening levels, at 1.1165.

Before making any more big movements on the Pound, investors are likely to wait for Thursday’s Bank of England (BoE) policy decision.

Traders will be looking for any notable change in tone from the bank’s meeting minutes, any change in the number of policymakers voting hawkishly, or even changes in the bank’s inflation forecast.

[Previously updated 12:40 BST 02/08/2017]

Wednesday morning saw little change in the GBP EUR exchange rate. The pair continues to trend near the week’s opening levels in the region of 1.11 as investors remain optimistic about the Euro outlook.

Markit’s UK construction PMI for July came in well short of expectations today, dropping from 54.8 to 51.9 despite being projected to only slip to 54.5.

Investors will be waiting for Thursday’s session before making any major moves on the Pound or Euro this week.

[Previously updated 16:51 BST 01/08/2017]

GBP EUR Exchange Rate Edges Higher on Tuesday

While GBP EUR has struggled to hold its ground above the key 1.12 level so far this week, 1.12 highs were tested towards the end of Tuesday’s European session. GBP EUR generally continued to trend in the region of 1.11 however.

Sterling was largely boosted by the day’s UK manufacturing data. However, while analysts are optimistic about the Q3 manufacturing outlook, others noted that with key Bank of England (BoE) and services data on the way the manufacturing print wasn’t hugely important.

Wednesday’s most notable report will be Markit’s July construction PMI for Britain, but investors are likely to wait for Thursday’s key session before making any big moves on the GBP EUR exchange rate this week.

[Previously updated 12:55 BST 01/08/2017]

Tuesday’s data left the Pound in stronger demand, but solid Eurozone data prevented the GBP EUR exchange rate from making any notable recovery. At the time of writing the pair continued to trend in the region of 1.11.

Markit’s UK manufacturing PMI was forecast to improve just slightly to 54.4 in July, but instead jumped from 54.2 to 55.1. Analysts believe this strong start to Q3 for Britain’s manufacturing sector could boost UK growth this quarter.

However, solid Euro sentiment limited GBP EUR gains. The Eurozone’s G2 Gross Domestic Product (GDP) projections met expectations and look to come in at 2.1% year-on-year, which is encouraging for the Eurozone outlook.

[Published 06:00 BST 01/08/2017]

The GBP EUR exchange rate saw little change in movement on Monday. While the day’s Eurozone stats were solid, the Euro has struggled to advance due to psychological resistance. Sterling was unable to benefit from the day’s UK data either.

GBP EUR did recover slightly from its 2017 lows last week, advancing from 1.1141 to 1.1175. Since markets opened this week the pair has remained in the region of 1.11.

Pound (GBP) Fails to Benefit from Mortgage Data

Sterling lacked momentum against the Euro on Monday and investors largely brushed over the day’s ecostats.

June’s UK mortgage approvals fell short of 65k expectations and came in at 64.68k, slipping from 65.11k. Mortgage lending improved slightly, from £3.9b to £4.1b.

The Bank of England’s (BoE) June consumer credit print dropped too, from £1769m, past the forecast £1500m to £1458m.

Elliott Silk, head of commercial at Sanlam UK, had this to say about the consumer credit report;

‘The Bank of England’s actions to curtail the growth of unsecured loans has had some impact, but more action is needed. While consumer credit accounts for a fraction of household debt, people are much more likely to default on unsecured loans. A lot of this has to do with understanding the area – there is a lack of financial education on the national curriculum, which means young people often come out of education naïve to the negative consequences of unsecured loans and personal debt. Companies also have a large part to play in the financial wellbeing of their employees – otherwise, they too will feel the negative impact that financial stress can have on employee performance.’

Sterling trade was also mixed in response to the day’s conflicting Brexit reports. UK Chancellor Philip Hammond reportedly indicated to businesses last week that a simple ‘off-the-shelf’ post-Brexit transitional deal was needed while a new UK-EU trade deal was reached, in order to prevent a ‘cliff-edge’ scenario.

However, on Monday official comments from the government appeared to contradict Hammond’s statements, creating yet more uncertainty about the already uncertain Brexit process.

Euro (EUR) Holds Ground as Eurozone Unemployment Impresses

The Euro didn’t see any fresh gains yesterday but remains relatively close to its recent 2017 highs against the Pound, thanks in part to consistently solid Eurozone ecostats.

Monday saw the publication of the Eurozone’s July Consumer Price Index (CPI) projection, which looks to remain at 1.3% as expected.

June’s Eurozone unemployment rate was likely to have supported the shared currency too as it beat forecasts of 9.2% and improved to 9.1%. The previous figure was revised from 9.3% to 9.2%.

Still, this report wasn’t enough to notably bolster European Central Bank (ECB) tightening bets. Craig Erlam from OANDA explained why it’s not worth getting too excited oiver;

‘Unemployment at 9.1% is still extremely high and when you break that down by country, it becomes much higher again in some places. Core inflation is also only at 1.3% which is still well below the ECB’s target and with the currency appreciating strongly this year, downward pressures here will continue to build.

The central bank should therefore tread very carefully when it comes to removing stimulus, as I expect it will.’

Germany’s June retail sales report also came in at the beginning of the week. It beat expectations month-on-month but fell short year-on-year.

GBP EUR Exchange Rate Forecast: Bank of England (BoE) Meets This Week

The biggest focus for GBP EUR exchange rate traders this week will be Thursday’s session, which will see a slew of economic news come in.

Most notable will be the Bank of England’s (BoE) August monetary policy decision. While the bank is expected to leave policy frozen, any shift in the number of policymakers voting to change policy is likely to impact Sterling.

On top of the BoE meeting, Thursday will see the publication of Markit’s final July services PMIs for Britain and the Eurozone. The Eurozone’s June retail sales results will also be published.

There’s plenty for investors to react to until then as well. Markit’s final July manufacturing PMIs will be published this morning, as well as the Eurozone’s Q2 Gross Domestic Product (GDP) projections.

Analysts expect Eurozone growth to improve to 2.1% year-on-year but if it looks to be even better than expected, this could make it more likely for the European Central Bank (ECB) to take an optimistic tone towards monetary policy later in the year.

As a result, the Euro has the potential to drive GBP EUR exchange rate movement until later in the week.