- GBP EUR Drops to 1.16 – Euro powers ahead on Tuesday
- Eurozone Data has Little Influence on Euro – Investors await Wednesday data
- UK Inflation Stats Strong – But BoE bets keep Pound weak
- Forecast: UK Retail Stats on Thursday – Unlikely to give Pound major support
GBP EUR Fails to Benefit from UK Jobs Data
Despite a brief, limited gain for GBP EUR in the early afternoon, the pair looked to end the day near its weekly lows. The Pound to Euro exchange rate briefly hit a low of 1.1600 on Wednesday afternoon, which was its worst level since March.
Wednesday’s Eurozone data largely met expectations, but this was enough to keep Euro investors happy.
The bloc’s final April inflation results slipped to 0.4% from 0.8% month-on-month and improved from 1.5% to 1.9% year-on-year, as forecast.
Italy’s March trade balance beat expectations of €1.97b, by rising to €5.42b.
Thursday will see the publication of Britain’s April retail sales results, but unless these beat expectations considerably GBP EUR is unlikely to recover to the week’s opening levels by the end of the week.
[Previously updated 12:58 BST 17/05/2017]
Wednesday saw the publication of yet another UK ecostat with mostly good numbers but one big negative takeaway. As a result, GBP EUR continued to trend in the region of 1.16.
Britain’s March employment stats impressively showed that the nation’s unemployment-rate had fallen to its lowest level in over 40 years.
However, it also showed that UK wage growth excluding bonuses had risen even slower than expected at 2.1%. Inflation is considerably outpacing wages, which analysts argue will negatively effect Britain’s consumer-facing economy in 2017.
[Previously updated 16:40 BST 16/05/2017]
GBP EUR Drops to 1.16 on Tuesday
Britain’s solid April inflation data was unable to support the Pound on Tuesday, so the GBP EUR was dragged down by a strong Euro to the level of 1.16.
The pair briefly hit a low of 1.1638 at around midday, the pair’s lowest level since the end of March.
While GBP EUR edged away from its lows slightly towards the end of the day, the Euro saw solid demand throughout.
As well as increased optimism about political stability in the Eurozone, investors were cheered by a solid Eurozone Gross Domestic Product (GDP) report on Tuesday.
The bloc’s second preliminary Q1 growth estimates came in with solid figures of 1.7% year-on-year and 0.5% quarter-on-quarter, as expected.
[Previously updated 12:51 BST 16/05/2017]
Despite the slew of ecostats published on Tuesday, the GBP EUR exchange rate was mostly dragged down by Eurozone optimism following French President Emmanuel Macron’s strong first few days on the job.
GBP EUR lost over half a cent on Tuesday, falling to the region of 1.16 and trending at around 1.1650 at the time of writing.
Sterling briefly benefitted from April’s UK Consumer Price Index (CPI) results, which beat expectations. However, the strong Euro kept GBP EUR weak and Sterling investors weren’t entirely impressed by the inflation stats after digesting them a bit more.
UK inflation improved from 2.3% to 2.7% year-on-year, beating the forecast 2.6%, while the monthly figure rose to 0.5% despite being projected to remain at 0.4%.
However, the Bank of England (BoE) indicated last week that it would not be pressured to tighten monetary policy even if UK inflation neared 3%.
[Published 06:00 BST 16/05/2017]
After a relatively quiet Monday, GBP EUR is likely to see more notable movement on Tuesday as Pound and Euro investors react to the day’s vital UK inflation and Eurozone growth ecostats.
GBP EUR slipped slightly last week despite briefly hitting a high of 1.1923. The pair ended the week at the level of 1.1790. Monday saw the pair largely trending near the week’s opening levels.
Pound (GBP) Remains Limp after Last Week’s BoE News
A lack of fresh UK data on Monday meant the Pound was left relatively weak after last week’s data and Bank of England (BoE) news worsened the British currency’s outlook.
The Bank of England voted 7-1 to leave monetary policy frozen at its loosest levels on record. Any hopes that more policymakers would vote for a rate hike faded as Kristin Forbes was once again the only dissenting member of the Monetary Policy Committee (MPC).
The bank’s 2017 growth forecast was downgraded to 1.9% and its inflation forecast was revised higher. Despite projections that UK inflation could reach almost 3% this year, the bank indicated that it would leave policy loose for the sake of creating jobs.
As a result, bets that the BoE could tighten UK monetary policy before 2019 faded and Pound traders became more bearish.
Last week’s other UK stats were also disappointing. March’s trade data revealed that Britain’s trade deficit had worsened to £-4.9b, while manufacturing and industrial production both failed to meet expectations in March.
Euro (EUR) Struggles to Strengthen as Greece Enters Recession Again
While Sterling failed to strengthen during Monday’s European session, demand for the Euro was also mixed, causing the pair to trend flatly for most of the day.
This was partially because the day’s Eurozone ecostats were generally low influence and too mixed to paint a particularly good or bad picture regardless.
Monday’s Eurozone data included Italy’s final April Consumer Price Index (CPI) results, which were solid. Inflation improved from 1.4% to 1.9% and beat expectations of 1.8%, while monthly inflation rose from 0% to 0.4%.
Portugal’s Q1 Gross Domestic Product (GDP) projections were also optimistic, looking to rise from 2% to 2.8% year-on-year and from 0.7% to 1% quarter-on-quarter.
However, Greece’s Q1 GDP projections weren’t nearly as optimistic, indicating that Greece was in recession once again. Quarterly growth contracted -0.1% while yearly growth came in at -0.5%.
Later this week, Greek MPs will be voting on more spending cuts and tax reforms in return for more loans for the nation.
GBP EUR Forecast: Will the Pound Jump on Tuesday?
After weeks of reaction to political news, the GBP EUR exchange rate is more likely to react to key economic data for most of this week, beginning with slews of data due to publish on Tuesday.
Among the most important datasets due this week is Britain’s April Consumer Price Index (CPI) results, which analysts predict will rise from 2.3% to 2.6% year-on-year but remain at 0.4% month-on-month.
If UK inflation increases as expected or beats expectations, some analysts will perceive greater pressure on the Bank of England (BoE) to tighten UK monetary policy.
However, the bank indicated last week that even 3% inflation would not pressure them to hike rates, so Sterling’s gains from this may be limited. Higher consumer prices would also worsen UK living conditions as long as wage growth remains slow.
Lower-than-expected inflation could mean better affordability for UK citizens, which may lead to higher UK growth in 2017. As a result, Tuesday’s inflation report will have mixed implications for the Pound outlook.
Many key ecostats will be published in the Eurozone on Tuesday too. Q1 Gross Domestic Product (GDP) projections from Italy, The Netherlands and the Eurozone as a whole will be published and are generally expected to come in solidly.
ZEW will also be releasing its May economic sentiment surveys for Germany and the Eurozone, and the currency bloc’s March trade surplus update will be published.
More key data is due to be published through until the end of the week. UK data still on the way includes March employment stats and April retail sales, while Eurozone April inflation and the ECB’s latest meeting minutes also have the potential to influence GBP EUR exchange rates later in the week.