- Euro British Pound Exchange Rate Holds at 0.86 – Sterling rally fades on Friday
- Eurozone PMIs Beat Expectations – Euro strengthens on strong activity
- EUR Forecast: Eurozone Data Throughout the Week – Including March inflation stats
- GBP Forecast: Brexit Set to Begin on Wednesday – Sterling could be volatile this week
Brexit Jitters Return and Strengthen Euro British Pound Exchange Rate
After slipping earlier in the day on boosted hopes for a strong Brexit deal, the Euro British Pound exchange rate recovered towards the end of Tuesday’s European session.
Brexit jitters returned and weakened the Pound. The British currency was sold after strengthening on Monday as the reality of the incoming Brexit process dawned once more on traders.
Analysts are in disagreement on whether or not the activation of Article 50 will cause the Pound to weaken further.
Some argue Sterling has already priced in Brexit, but others speculate that the British currency still has further to fall.
Either way, Wednesday will be the beginning of a process that could last two years or longer and is sure to be a pivotal day for Pound trade – but the Euro could take point in Euro British Pound trade later in the week if Eurozone data impresses.
[Previously updated 12:48 BST 28/03/2017]
The Euro British Pound exchange rate trended largely flatly on Tuesday morning, but the pair had slipped slightly from the week’s opening levels.
Sterling remained firm on Tuesday after its Monday gains as investors’ worst Brexit concerns faded slightly.
Reports emerged on Tuesday morning claiming that the UK government was moving away from the threats it made earlier in the year – that it would sooner accept no Brexit deal than a bad one.
Allegedly, European diplomats in Britain stated that the government now regrets that stance. This has bolstered market hopes that the government will do what it can to get a good post-Brexit UK-EU deal.
[Previously updated 16:30 BST 27/03/2017]
Euro British Pound Exchange Rate Flat as Both Currencies Strengthen on Monday
Investors continued to unwind the ‘Trump rally’ in favour of safer assets throughout Monday’s European session, leading to increased strength in the Euro and Pound.
As a result, the Euro British Pound exchange rate was largely flat in the region of 0.86 for most of the day.
Sterling had been the stronger performer in the morning, but solid German business sentiment results from Ifo as well as comments from European Central Bank (ECB) official Sabine Lautenschläger strengthened the shared currency’s defenses.
Lautenschläger hinted at a press conference on Monday that markets should get ready for ‘a change’ in ECB policy, sparking speculation that the central bank could wind back further on quantitative easing (QE) or even tighten monetary policy in the coming year.
[Previously updated 12:45 BST 27/03/2017]
The weekend’s political news from the US caused the Euro British Pound exchange rate to slip when markets opened on Monday.
A proposed ‘American Healthcare Act’ (AHCA) from the US President Trump administration was pulled due to a perceived lack of support for the bill in Congress – despite Congress being majority Republican.
This led to increased market concerns that US President Trump would be unable to pass his proposed fiscal policy plans through Congress either. As a result, uncertainty soared in the world’s biggest economy and comparatively ‘safe’ currencies like the Pound and Euro benefited.
Sterling came out on top on Monday however. Sterling remains a cheap purchase due to Brexit jitters and is appealing due to highly secure UK government bonds – which are priced in GBP.
[Published 06:00 BST 27/03/2017]
The Euro British Pound exchange rate recovered from multi-week lows at the end of last week’s trade session as the latest Eurozone data impressed investors. Sterling weakened slightly as analysts speculated UK retail sales may start to weaken again in the coming months, but EUR GBP still ended the week below opening levels.
EUR GBP began last week trending at the level of 0.86. While it briefly rose to a high of 0.87 earlier in the week, it spent most of the week below its opening levels due to impressive UK data.
Euro (EUR) Boosted by Impressive Eurozone PMIs
Demand for the Euro was solid throughout last week as political concerns lightened and Eurozone data was largely better-than-expected.
Earlier in the week, bets that pro-EU French presidential candidate Emmanuel Macron could win this year’s French general election increased after his strong performance in a televised debate.
The Euro was bolstered further on Friday as Markit’s preliminary March PMIs for the Eurozone came in well above expectations, indicating strong economic activity across the bloc.
Germany’s key manufacturing PMI beat expectations of a slip to 56.5, by improving from 56.8 to an impressive 58.3. Germany’s services and composite prints also impressed, coming in at 55.6 and 57 respectively.
Due to solid PMIs from Germany and France, the Eurozone’s overall PMI figures also beat expectations. The Eurozone manufacturing PMI improved from 55.4 to 56.2, services from 55.5 to 56.5 and composite from 56 to 56.7.
Analysts took an optimistic tone in reaction to the stats, which indicated that economic activity was shrugging off election uncertainty. Bert Colijn, senior economist from ING, stated;
‘While political uncertainty in the Eurozone itself and among its larger trade partners continues to be high, sentiment among Eurozone businesses about activity in the coming year continues to improve.
There are plenty of reasons to be optimistic though, as businesses indicate continued increases in new orders, the strongest output growth in near six years and employment is growing at a pace not seen for almost a decade. The acceleration of job growth will underpin improvements in domestic demand in the months ahead, which is in line with this month’s strong consumer confidence figures.’
Pound (GBP) Slips from Highs on Analyst Warnings
Last week’s UK February Consumer Price Index (CPI) and retail sales results were enough to give the Pound a significant boost, which ended up leaving EUR GBP lower by the end of the week.
However, some downsides remained which caused Sterling to trend limply on Friday and allow EUR GBP to emerge from its lows.
February’s retail sales data in particular has left analysts warning markets to not be too optimistic. While monthly retail sales jumped from -0.5% to 1.4% and yearly sales from 1% to 3.7%, the three months into February still saw the worst three-month-drop in retail activity since 2010.
Analysts also warned that despite a solid February, retail activity could still fall in the coming months as consumer prices continue to rise while wage growth slows, squeezing household spending.
Euro British Pound Forecast: Brexit Process begins Next Week
Some of the coming week’s economic data may take a backseat for Euro British Pound exchange rate traders as the UK government is set to finally activate Article 50 and begin the Brexit process proper.
Some analysts speculate Brexit still isn’t fully priced in to Pound trade, which means Pound jitters are highly possible in the coming days. Britain’s government maintains that it is on track to begin Brexit on Wednesday the 29th of March.
With Sterling likely to be volatile in the coming week, it may not see much support even if UK data is solid. This means EUR GBP may be in for a week of gains if Eurozone data impresses.
The coming week will see a wide variety of Eurozone data published. On Monday, Ifo will publish its March business confidence survey results for Germany, followed by French and Italian confidence data for March on Wednesday.
Thursday will see a slew of Eurozone data including Spanish and German inflation stats for March, as well as March business and consumer confidence data for the Eurozone as a whole.
Lastly, Friday’s key Eurozone data includes Germany’s March employment stats and February retail sales, as well as March inflation data for Italy and the Eurozone.
If the beginning of the Brexit process does indeed cause Pound jitters, the Euro may be able to capitalise if these Eurozone ecostats beat expectations and drive the Euro British Pound exchange rate higher.