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Strong Eurozone PMIs Knock British Pound Euro Exchange Rate From Highs

  • British Pound Euro Exchange Rate Near 1.15 – Slips from best levels since early-March
  • UK Retail Sales Beat February Expectations – But worst 3-month activity since 2010
  • Eurozone PMIs Impress – Eurozone economic activity boosts Euro
  • GBP Forecast: Brexit Process Begins Next Week – Article 50 still on track.

British Pound Euro Exchange Rate Falls from Highs Amid Strong Eurozone PMIs

The British Pound Euro exchange rate looked to end the week closer to its opening levels, as the European session drew to an end with GBP EUR well below its weekly high of 1.16.

The UK government plans to activate Article 50 and formally begin the Brexit process next Wednesday – the 29th of March. Some analysts suggest the Brexit is still not fully priced in, which could mean for some volatile Pound trade next week.

If the coming week’s Eurozone data impresses the British Pound Euro exchange rate could easily continue to fall.

Next week’s influential Eurozone data includes inflation stats from Germany and the Eurozone as a whole, as well as German unemployment figures.

[Previously updated 13:02 GMT 24/03/2017]

Demand for the British Pound Euro exchange rate slipped on Friday, as analyst warnings that UK retail sales could still slow dampened Sterling appetite while the Euro was bolstered by the day’s impressive Eurozone data.

Markit’s preliminary March PMIs for the Euro bloc beat expectations in every major print. Manufacturing, services and composite figures impressed in both French and German results.

Notably, Germany’s manufacturing PMI, which was expected to worsen slightly from 56.8 to 56.5, actually improved to 58.3.

Due to solid economic activity in major Eurozone nations, the bloc’s overall PMIs also beat expectations. Eurozone manufacturing rose from 55.4 to 56.2, services climbed from 55.5 to 56.2 and the composite from 56 to 56.7.

[Published 06:30 GMT 24/03/2017]

The British Pound Euro exchange rate saw another day of gains on Thursday as February’s UK retail sales results came in well above expectations. A lack of supportive Eurozone data made it easier for Sterling to capitalise.

This week has seen GBP EUR make gradual advances. The pair opened the week at 1.15 and on Thursday touched on the level of 1.16 – its highest level since the beginning of March.

Pound (GBP) Records Gains after Impressive UK Retail Stats

The main event of Thursday’s European session was the publication of Britain’s February retail sales results, which came in well above expectations and bolstered demand for the Pound.

According to the month-on-month print, retail sales beat forecasts of 0.4% to come in at 1.4%. The yearly print also impressed, beating the expected 2.6% with a 3.7% result.

This bolstered hopes that activity in Britain’s retail sector would remain solid throughout the year. Investors had previously been concerned that rising consumer prices and slower wage growth would lead to a squeeze in 2017 household spending.

Retail is part of the services sector, which makes up a considerable portion of Britain’s Gross Domestic Product (GDP).

However, while the February figures excited markets, the Office for National Statistics (ONS) as well as other analysts advised caution looking ahead.

Previous figures were revised lower, with January’s monthly figure dropping from -0.3% to -0.5%.

As well as this, the ONS (the report’s publisher) was careful to point out that the three months into February saw the biggest three-month drop in UK retail activity since 2010. According to Kate Davies, senior statistician from the ONS;

‘The underlying trend suggests that rising petrol prices in particular have had a negative effect on the overall quantity of goods bought over the last three months.’

Other analysts have also suggested retail sales could slow again in the coming months, which prevented GBP EUR from capitalising and holding its best weekly levels. Alan Clarke from Scotiabank stated;

‘UK retail sales showed the first upwards surprise for 3 months. Will it last? With inflation getting higher and higher, the fundamentals would suggest not – i.e. the squeeze on disposable income is intensifying. The downward glide path should resume in the coming months.’

Euro (EUR) Strength Fades amid Lack of Fresh Supportive Data

Demand for the Euro has been strong this week due to increased hopes that the Eurozone would avoid any sort of political fallout in 2017.

Tuesday saw the Euro gain momentum. Bets increased that pro-EU politician Emmanuel Macron could win this year’s French general election and keep the nation in the Eurozone, following a televised debate between French presidential candidates on Monday evening.

However, due to a lack of fresh supportive ecostats in the last few days, the Euro’s strength faded on Thursday making it easier for GBP EUR to advance to new multi-week highs.

Investors have been jittery on the shared currency in recent months due to concerns that a key Eurozone nation, such as France or German,y may vote for an anti-EU populist leader who would withdraw that nation from the bloc in this year’s general elections.

The possibility of a key nation leaving the Eurozone has been perceived as one of the biggest threats to the Euro itself.

British Pound Euro Exchange Rate Forecast: Eurozone PMIs Ahead

The Euro could take point in British Pound to Euro exchange rate movement before markets close for the week, as Friday will see the publication of the Eurozone’s preliminary March PMIs from Markit.

These will be the first key indication of how the Eurozone’s economic activity has been this month. Particularly influential prints include Germany’s manufacturing PMI, and the Eurozone’s overall manufacturing, services and composite prints.

If they all beat expectations, these as well as lightening political concerns could see GBP EUR fall from its highs as the Euro continues to build momentum.

On the other hand, worse-than-expected Eurozone economic activity will cause investors to grow concerned that the European Central Bank (ECB) may need to keep accommodative monetary policy for even longer than hoped.

As for Pound trade, Sterling may still become more jittery in the next few trade days as the UK government is all set to formally begin the Brexit process on the 29th of March.

If Friday’s Eurozone data fails to impress, it’s likely GBP EUR will end the week near its best levels since early-March. If the British Pound Euro exchange rate is sold from its highs however, it could end up closer to the week’s opening levels once more.