Last week the GBP EUR exchange rate recovered from a three-year low before eventually ending the week just slightly lower than its opening levels. Rumours that Article 50 could be activated before April 2017 weighed heavily on the Pound on Friday, and there was little drive in Sterling’s Monday recovery.
However, the Pound Euro exchange rate returned to trending in the region of 1.16 on Wednesday, holding this level following the release of preliminary PMI reports for the Eurozone and its largest economies. With UK data comparatively limited this week, more mixed news for the currency bloc has the potential to send the GBP EUR exchange rate beyond 1.17 before the weekend. The pairing briefly hit that level on Wednesday morning prior to the release of the UK’s BBA Loans for House Purchase report.
- GBP EUR Exchange Rate Holds Tuesday Best –Above 1.16 for most of the day
- Sterling Attempts Recovery Amid Quiet Data Day – Recovers some lost ground after Friday fall
- Update: Preliminary Eurozone PMIs Mixed – Eurozone activity still sturdy in August
- Forecast: Pound Likely to Flounder – Lack of data and Brexit concerns could weigh GBP down
GBP EUR Rate Holds Above 1.16 on Tuesday
Despite fluctuating on Monday, the Pound to Euro exchange rate was eventually able to hold above the key level of 1.16 for most of Tuesday’s trade session as investors bought the Pound higher in a bout of profit-taking.
Briefly reaching levels as high as 1.1656, the pair was able to advance due to underwhelming Eurozone data. While the Eurozone’s PMI scores came in with modest improvements in Services and Composite prints, German figures held Eurozone sentiment down.
The Euro was weighed down further on Tuesday afternoon, following the publication of the Eurozone’s August consumer confidence report.
Expected to lighten slightly from -7.9 to -7.7, consumer confidence instead fell further to -8.5. This disappointing report drudged up concerns that the Brexit vote had affected the Eurozone in some way after all.
Sterling’s rally is unlikely to last long however, as short-covering rallies are typically volatile and short lived. This means that if upcoming German data impresses investors, the Euro could easily recover.
(Previously updated 10:05 BST 23/08/2016)
Pound Euro Exchange Rate Stronger as German Data Disappoints
The Pound Euro exchange rate achieved a high of 1.1643 on Tuesday and managed to remain around that level following the publication of the latest Manufacturing, Services and Composite PMIs for the Eurozone and its largest economies.
Although measures for France and the Eurozone as a whole exceeded forecasts (with the currency bloc’s Composite gauge advancing from 53.2 to 53.3) the German data fell short on all fronts, allowing GBP to maintain its modest uptrend against the Euro.
(Previously updated 08:00 GMT)
The GBP EUR exchange rate has been largely unable to hold above the key level of 1.16 since the pair’s tumble earlier in August. The Pound Euro conversion briefly beat this level late last week and again on Monday morning, but by Monday afternoon was once again edging lower, trending in the region of 1.1580.
Pound Sterling (GBP) Investors Lacking Drive to Advance
When markets opened for the week, the Pound (GBP) surged as markets attempted to recover some of the ground lost during Friday’s Sterling selloff.
To refresh, the Pound hit a three-year low of 1.14 before edging higher towards the close of last week due to better-than-expected July ecostats, but plunged on Friday in response to statements reportedly made by anonymous UK government officials.
These reports indicated that UK Prime Minister Theresa May had been sympathetic to the case for activating Article 50 before April 2017. That is; beginning the formal Brexit process.
While these reports were quickly disowned by Downing Street officials, Sterling still shed considerable value across the board on Friday.
Unfortunately the recovery in Pound (GBP) exchange rates was indeed limited – while Sterling higher in the morning, it wasn’t long before the Pound was back below 1.16 against the Euro.
Amid a lack of key UK ecostats or optimistic news to react to, the low-yield Pound just wasn’t appealing enough to sustain an impressive climb against the Euro, especially with many key Eurozone prints due for publication this week.
Euro (EUR) Steadies Ahead of Key Figures
Similarly to the Pound, the Euro has had little to react to on Monday with much of the currency’s movement being mixed and relatively uninspired.
Last week’s ecostats included Eurozone inflation figures. While monthly inflation contracted more than expected, the year-on-year CPI score came in at 0.2% as forecast and revealed the strongest inflation in the bloc for eight months.
This was the latest in a series of reports that indicated that despite the Brexit vote taking Britain’s economy off track, the Eurozone’s recovery was proceeding largely as expected.
On Monday, the Euro traded largely flatly, solidifying around its current levels as investors readjusted ahead of the week’s key data reports.
July’s preliminary Eurozone PMIs marked a turning point for the Euro after indicating that Eurozone economic activity had not yet been adversely affected by the Brexit.
This is why August’s preliminary PMIs are being seen as so vital, and why the Euro’s movement was mostly just adjustment on Monday.
GBP EUR Exchange Rate Forecast: Eurozone PMIs in Focus
The first indication of how the Eurozone’s economy has fared in August will be published today, in the form of Markit’s preliminary PMI scores.
Manufacturing and Services figures will be released for key nations such as France and Germany, as well as figures for the Eurozone as a whole. Most figures are currently forecast to have worsened slightly since July.
For example, German Manufacturing is expected to have fallen from 53.8 to 53.6, Services from 54.4 to 54.3 and Composite from 55.3 to 55.1.
The Eurozone’s Manufacturing measure is expected to remain at 52 overall, with Services slipping from 52.9 to 52.8 and Composite from 53.2 to 53.1.
If these figures come in even lower than expected, it could re-stoke speculation that the Brexit vote has indeed had a negative effect on the Eurozone’s economic recovery and send the Euro plummeting.
On the other hand, better-than-expected scores would cause the Euro to strengthen and European Central Bank (ECB) easing bets to calm.
Another influential report due today is the Eurozone consumer confidence gauge, which is forecast to be lightening from -7.9 to -7.7. If all the day’s figures beat expectations, it could inspire the Euro to trend higher throughout the week.
The only UK figure due for publication is the CBI trends report, which is unlikely to be influential, allowing the Euro to take point in GBP EUR exchange rate movement today and moving forward.