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Upcoming GBP EUR Movement to Focus on Eurozone PMIs and UK Growth

  • GBP EUR Exchange Rate Remains Near 1.09 – Pair slipped last week
  • Euro Struggles to hold Highs on ECB Uncertainty – Investors may be too bullish on Euro
  • GBP Forecast: UK Growth Due Thursday – Sterling outlook still limited however
  • EUR Forecast: Eurozone PMIs in Focus – Eurozone economic performance to influence Euro

Updated 16:45 BST 21/08/2017:

GBP EUR Exchange Rate Hits New 2017 Low

While the pair continued to trend relatively closely to the week’s opening levels, GBP EUR touched on a fresh 2017 low of 1.0915 during Monday’s European session.

Foreign exchange markets didn’t have much to react to throughout the day, save for an optimistic report on Germany’s economy from Bundesbank.

Tuesday’s session will be busier in comparison.

Britain’s latest public sector net borrowing and CBI distributive trends results will come in, as well as ZEW’s economic sentiment surveys for Germany and the Eurozone.

[Previously updated 12:58 BST 21/08/2017]

Movement in the GBP EUR exchange rate was relatively narrow when markets opened on Monday, as the pair trended near the weekend level of 1.0944. The pair briefly touched a high of 1.0971.

Amid a lack of notable datasets today, investors are simply waiting for key data and central bank news expected later in the week.

A report from Bundesbank came in on Monday morning, with the bank noting that Germany’s economy was growing faster than expected.

Investors feel they have little reason to sell the strong Euro from its highs, despite warnings over the currency’s value from the European Central Bank (ECB).

[Published 06:00 BST 21/08/2017]

Amid the slew of key UK and Eurozone data published, the GBP EUR exchange rate slipped last week. The Pound saw poor performance due to underwhelming UK inflation but the Euro struggled to hold its highs for most of the week due to European Central Bank (ECB) uncertainty.

GBP EUR began last week trading at around 1.1002. After fluctuating for days, the pair trended relatively closely to a 2017 low of 1.0939 towards the end of Friday’s European session.

Pound (GBP) Fails to Find Support amid Underwhelming UK Data

Britain’s latest ecostats didn’t improve the long-term Pound outlook, instead markets have been left still concerned about Britain’s economic outlook.

Hawkish investors hoping for the Bank of England (BoE) to tighten UK monetary policy within the foreseeable future have been disappointed, as Britain’s latest inflation stats fell short of expectations.

With inflation slower than expected and real wages continuing to fall, the BoE now has more reason to defend keeping monetary policy at its loosest levels on record.

The latest retail sales results disappointed too. While monthly retail sales actually beat expectations with a figure of 0.3%, the previous figure was revised lower from 0.6% to 0.3%.

Year-on-year retail sales slowed from a revised 2.8% to 1.3%, missing the projected 1.4%.

Some analysts argued the retail sales stats showed that Britain’s consumer activity was remaining resilient despite the pay squeeze, but amid concerns that the pay squeeze could be a long-term concern, other analysts are more cautious.

Andrew Sentence, economic adviser from PwC, stated;

‘Consumers may also be becoming more cautious about spending because of the political uncertainty following the General Election and surrounding the Brexit process. …

UK consumers are watching and waiting – for inflation to subside and for the post-Brexit to become clearer. Until there is some relief on these two key issues, subdued growth of retail sales looks set to continue through this year and into 2018.’

Overall, there simply wasn’t much reason for investors to become more optimistic about Britain’s economy or the Pound last week, which is one of the main reasons GBP EUR ultimately weakened.

Euro (EUR) Investors Remain Bullish Despite ECB Uncertainty

Last week, multiple signals warned markets not to buy the Euro too much, or risk impacting the European Central Bank’s (ECB) monetary policy outlook.

Reports indicated that ECB President Mario Draghi would not be offering further forward guidance for markets at the Jackson Hole symposium on the 24th and 25th of August.

This caused concern that the ECB may not be preparing to discuss quantitative easing (QE) as soon as September, despite many economists predicting they would.

The ECB’s latest meeting minutes contained another warning for investors, noting that if the Euro ‘overshoots’ and becomes too strong, it could impact the ECB’s policy plans.

Despite all this though, the Euro continued to see strong performance, trending near its best 2017 levels against the Pound.

Recent Eurozone data continued the trend of indicating the bloc was still recovering steadily too.

While Eurozone inflation came in at -0.5% month-on-month in July as expected, the bloc’s latest yearly Q2 growth projections beat expectations and look to improve to 2.2%.

GBP EUR Forecast: UK Growth Projections Ahead

The coming week’s economic calendar is a little quieter, but there are still a number of key ecostats that could influence the Pound to Euro exchange rate.

Tuesday will see the publication of Britain’s July public sector net borrowing report, which could influence Pound movement slightly, followed by CBI’s industrial trends report for August.

Key Eurozone data will come in on Tuesday too, with ZEW set to publish its August economic sentiment surveys from Germany and the Eurozone.

Wednesday will be the biggest day for data though, as Markit will be publishing its preliminary August PMIs for the Eurozone and Eurozone consumer confidence projections will come in too.

As always, investors put the focus on German manufacturing data and the Eurozone’s overall PMIs.

German manufacturing is expected to have slowed slightly in August, dragging Eurozone manufacturing down too. Eurozone services are expected to hold steady though.

As for the week’s biggest UK report, Thursday will see the publication of Britain’s second Q2 Gross Domestic Product (GDP) projection.

If it beats the previous estimate of 1.7% year-on-year and 0.3% quarter-on-quarter, the GBP EUR exchange rate could be bought up from its lows towards the end of the week.