- 2017 Pound Euro Exchange Rate Near 1.15 – Pair fails to sustain any recovery
- Euro Outlook Stronger – Confidence in Eurozone makes Euro appealing
- Eurozone PMIs Strong – Euro holds most highs against Pound
- GBP Forecast: UK Growth Data Thursday – Pound movement could be otherwise limited
2017 Pound Euro Exchange Rate Edges Away from Lows
After hitting new lows on Tuesday morning, the 2017 Pound Euro exchange rate recovered slightly from its worst levels in the afternoon as Sterling cooled from its Monday losses.
Investors digested what was still a clear lead for the Conservative party in UK general election polls, while the Euro’s strength was limited by news that Greece had thus far failed to win its new debt deal.
This was despite Tuesday’s Eurozone data being largely optimistic. As well as the bloc’s May PMIs generally beating expectations, Germany’s final Q1 growth stats met expectations and Ifo’s German business confidence surveys also impressed.
[Previously updated 12:36 BST 23/05/2017]
The 2017 Pound Euro exchange rate continued to trickle lower on Tuesday morning as the day’s Eurozone ecostats were largely impressive and market appetite for the Pound remained weak. GBP EUR hit a low of 1.1529 on Tuesday.
UK Prime Minister Theresa May’s U-Turn on the controversial ‘dementia tax’ failed to spur on a Pound recovery as uncertainty remained on whether this would be enough to help improve the Conservative party’s polls.
Tuesday’s slew of Eurozone data helped the shared currency to hold its Monday gains.
According to Markit’s preliminary May PMIs, German manufacturing was on track to be even better than expected at 59.4. The overall Eurozone’s composite PMI is projected to remain at a solid 56.8 despite being forecast to slip to 56.6.
[Previously updated 16:51 BST 22/05/2017]
2017 Pound Euro Exchange Rate Falls to 1.15
Despite a lack of influential data due on Monday, the 2017 Pound Euro exchange rate fell into the region of 1.15 for the first time since March.
While a U-Turn from UK Prime Minister Theresa May on her controversial social care proposal helped the Pound to recover from its worst levels, the Euro remained in high demand all day due to comments from German Chancellor Angela Merkel.
Merkel had stated that the Euro is ‘too weak’ due to loose monetary policy from the European Central Bank (ECB), which was one of the main reasons for Germany’s persistent trade surplus.
On Merkel’s subtle suggestion, investors rushed into the shared currency. However, that could quickly change on Tuesday if the Eurozone’s preliminary May PMIs fail to impress.
[Previously updated 12:39 BST 22/05/2017]
The 2017 Pound Euro exchange rate tumbled once again when markets opened on Monday. GBP EUR fell to a new low of 1.1561 – its worst level since the end of March.
This was largely due to the weekend’s news that the UK Conservative polling lead against the Labour party had halved from around 20 to 10 points within a week.
UK Prime Minister Theresa May’s plans to charge elderly citizens for healthcare if they have over £100k in assets proved controversial. As the elderly make up a big part of the Conservative voterbase, this plan caused the leading party’s polling figures to drop, which worsened UK election uncertainty.
The Euro, on the other hand, benefitted from news that German Chancellor Angela Merkel had stated the currency was ‘too weak’.
[Published 06:00 BST 22/05/2017]
Even after a week of losses it may be difficult for the 2017 Pound Euro exchange rate to recover next week due to a lack of strong UK data until Thursday. Eurozone PMIs are likely to be the big focus of traders early in the week.
GBP EUR began last week trading at 1.1790. Due to a strong Euro and mixed UK data, the pair plummeted on Wednesday. Its late-week recovery attempts failed and the pair ended the week nearer a May-low of 1.1614.
Pound (GBP) Fails to Benefit from Strong Data
Pretty much all of last week’s UK data beat expectations. While there were some drawbacks, they generally indicated that Britain’s economy was still resilient in April despite rising inflation and slowing wage growth.
Analysts have become concerned that Britain will see a consumer ‘pay squeeze’ as wages fail to keep up with the quickening rate of inflation.
However, Thursday’s UK retail sales results indicated that British citizens were a lot more eager to shop than expected, which is likely to mean solid growth for Britain’s consumer-facing economy in April.
Month-on-month retail sales were projected to rise from -1.4% to 1%, but instead jumped to 2.3%. The yearly retail sales result was even more impressive, doubling from 2% to 4% despite being predicted to come in at 2.1%.
Friday saw a report from the Confederation of British Industry (CBI) showing that UK factory orders were strong in May too, growing at their fastest rate since February 2015. CBI chief economist Rain Newton-Smith pointed out concerns about rising costs, however;
‘On the other side of the coin though, we have mounting cost pressures and expectations for factory-gate price rises are running high.
Boosting productivity is key to alleviating some of the cost pressures that manufacturers are facing. Sustained investment in innovation and education will be vital to shore up the success of British industry.’
Euro (EUR) Remains Buoyant on Eurozone Optimism
The Euro has gone from a currency with an uncertain future to a market favourite within weeks, largely due to the French election and strong start for the nation’s new President, Emmanuel Macron.
In his first week on the job, Macron hired French politicians from the left, centre and right to join his team in a move that investors believe will bolster his sway in upcoming parliamentary elections.
He also met with German Chancellor Angela Merkel and joined her to call for a stronger and reformed Eurozone. This bolstered market confidence that the Eurozone could become sturdier, politically and economically.
The past week’s Eurozone ecostats were solid. Eurozone inflation came in at 1.9% year-on-year as projected. French unemployment dropped below 10% for the first time since 2012, hitting 9.6% and improving French market confidence further.
However, according to Friday’s Eurozone consumer confidence projections, confidence was on track to lighten from -3.6 to just -3.3 in May rather than -3.
This prevented GBP EUR from being pushed even lower on Friday.
2017 Pound Euro Forecast: Eurozone PMIs Could Increase Eurozone Outlook Further
The coming week’s UK economic calendar will be relatively uneventful until key Q1 UK growth figures are published on Thursday.
While British public sector net borrowing stats will be published on Tuesday and business investment projections will be published on Thursday, neither of these are likely to cause significant Pound movement.
The Euro is more likely to drive GBP EUR movement instead next week, as preliminary Eurozone PMIs for May will be published on Tuesday.
These are often the best early-indication of how the Eurozone’s economy is holding up in a month before finalised datasets begin to come through. Of particular importance will be Germany’s manufacturing PMI and the Eurozone’s overall PMIs.
Analysts currently expect German manufacturing to have slowed a bit in May, but remain at a strong 58 overall. If PMIs come in well below expectations the Euro is likely to weaken slightly next week.
Other notable Eurozone data due for publication next week includes Ifo’s German business confidence surveys for May and GfK’s German consumer confidence survey for June.
Later in the week, leaders from G7 nations will attend the G7 summit in Italy, but this is unlikely to have a notable influence on the 2017 Pound Euro exchange rate.