- Pound Euro Exchange Rate Trends Around 1.1950 – Fails recovery attempts
- Brexit Worries Continue – CBI indicates slowdown in manufacturing activity
- Update: Flash UK Growth on Wednesday – Positive Q2 growth fails to inspire
- Forecast: Eurozone Data Ahead – Unemployment, CPI, GDP
Pound Euro Exchange Rate Slumps on Wednesday
The Pound to Euro exchange rate slipped further towards 1.19 on Wednesday as the latest UK data did little for investors in a post-Brexit vote environment. The pair trended in the region of 1.1930 on Wednesday evening.
UK growth was on track to improve from 0.4% to a better-than-expected 0.6% from April through June, indicating that the UK economy was becoming increasingly healthy in the run up to June’s EU Referendum vote.
However, as data from the last week has suggested, the UK’s economy is at risk of contracting and even falling into recession in Q3 and beyond, as the UK’s decision to Brexit affects business decisions.
The Euro remained solid throughout the day slightly boosted by better-than-expected German consumer confidence. GfK’s German consumer confidence survey revealed that confidence had merely slipped from 10.1 to 10 going into August, despite a projected slip to 9.9.
(Previously updated 16:14 BST 26/07/2016)
Pound Euro Exchange Rate Fluctuates on Tuesday
The Pound to Euro exchange rate largely failed attempts to advance throughout Tuesday’s session, but successfully recovered from a brief fall to a low of 1.1872.
GBP/EUR has managed to remain above the key level of 1.19, but sunk below 1.1950 on Tuesday as Bank of England (BoE) stimulus bets increased due to comments from policymaker Martin Weale.
Investors now look ahead to tomorrow’s Q2 UK GDP report. Forecasts are aiming for an increase from 0.4% to 0.5% quarter-on-quarter, but most analysts now expect the figure to have slumped to 0.3%.
Sterling is likely to continue to be weighed down even if growth figures come in above expectations, with August’s BoE policy decision meeting just over a week away already.
(Previously updated 14:33 BST 26/07/2016)
BoE’s Weale Calls for More Stimulus, GBP EUR Exchange Rate Declines
The Pound Euro exchange rate softened on Tuesday as investors responded to some surprising comments from Bank of England (BoE) official Martin Weale.
It appears that the UK’s latest PMI numbers have convinced Weale that immediate policy action is required. He commented: ‘They [the PMI measures] are the best short-term indicator we have at the moment. I certainly feel they are very material for the decision we’ll be taking next week,” he told the FT, adding that they were “a lot worse than I had thought” and showed “expectations have worsened sharply. I see things rather differently from what I would have done had we not had those numbers and the material point is that they were collected after July 12, so after the initial shock of the referendum.’
The GBP EUR exchange rate is currently trending in the region of 1.1900.
Tomorrow’s UK GDP report is likely to have a notable impact on Pound Euro exchange rate trading, particularly if the result differs markedly from forecasts.
A significant slowing in output in the second quarter would stand the UK economy in bad stead for the third quarter.
(Previously updated 08:00 26/07/2016)
The Pound Euro exchange rate attempted to return to last week’s highs on Monday. However, following yet more dire Brexit-influenced news, Sterling dropped to trade nearer the week’s opening levels of 1.1945. Poor UK PMIs and now a CBI report have weighed on Sterling since Friday.
GBP/EUR fluctuated widely throughout last week’s session, hitting a high of 1.2038 and a low of 1.1872 before settling between these levels. The pair didn’t lose or gain considerably throughout the week, settling on Friday near the week’s opening levels. As a new week of trading began GBP/EUR was still near these levels, trending in the region of 1.1940.
Pound Sterling (GBP) Recovery Attempts Thwarted by CBI Report
The Pound began to firm on Monday on a quiet day for global ecostats.
However, the currency has scarcely had a dull moment as news of how the UK economy has been affected by the Brexit vote continue to undermine the currency’s best levels.
The Pound plummeted last Friday following the release of the first post-Brexit flash PMIs. These scores indicated that all major UK sectors are expected to contract in July. While this was expected, the actual figures disappointed even these bearish expectations.
With news that the Brexit has indeed affected Britain’s economy negatively, Sterling has been under additional pressure. This was followed up by a gloomy manufacturing report from CBI on Monday, as reported by Reuters;
‘Optimism among British manufacturers fell in July to its lowest level since early 2009 after Britain’s decision to leave the European Union, a survey showed on Monday, even as output rose in the last three months. …
The survey adds to signs the Brexit vote might be starting to take a toll on Britain’s already slowing economy, following a survey from Markit that suggested business activity is declining at the fastest rate since 2009.’
Sterling had originally attempted to advance on Monday, but slipped back down to its opening levels and trended flatly following the report.
Euro (EUR) Solid after Optimistic Flash PMIs
Sentiment towards the Euro has strengthened since last week as despite an uninspiring European Central Bank (ECB) policy meeting, recent economic news has suggested that the Eurozone is remaining resilient.
Friday’s flash Eurozone PMIs scored above expectations. While the Manufacturing and Services sectors were down from June, expectations had been bearish due to fears that the Eurozone had been affected negatively by Britain’s Brexit vote.
These results indicated that the Eurozone had fared better-than-expected since the Brexit and had seemingly weathered the worst of the economic damage the vote was causing Britain.
German business sentiment deteriorated less than expected in July, signalling companies may have withstood the initial shock of Britain’s decision to leave the European Union.
The Munich-based Ifo institute’s business climate index fell to 108.3 from 108.7 in June. The median estimate in a Bloomberg survey of economists was for a decline to 107.5.
The report suggests Europe’s largest economy remains robust for now even as the U.K., the third-largest destination for German exports, reels from the effects of its June 23 referendum.
The Euro was also slightly bolstered by news from the European Central Bank (ECB) that the bank’s intense Quantitative Easing measures had made a positive difference to the Eurozone’s economic recovery.
Pound Euro Exchange Rate Forecast: Wednesday’s Session Vital for Movement
The Pound to Euro exchange rate could continue on its currently relatively muted and flat path right up until Wednesday, as Tuesday’s session sees little in the way of influential data for the UK or Eurozone.
Wednesday, on the other hand, is set to be a vital session for British economic data. The UK’s Q2 Gross Domestic Product (GDP) is due for publication in the morning, and is forecast to improve slightly from 0.4% to 0.5% quarter-on-quarter.
UK growth had been solid in April, but investors remain concerned that Brexit jitters throughout June (the run up to the EU Referendum) had caused a negative impact on growth.
If the UK’s Q2 GDP report comes in below expectations, it would indicate that pre-Referendum worries were worse-than-expected. Hopes that the UK economy was sturdy enough to weather Brexit damage would fall, and Q3 growth projections would plummet.
On the other hand, optimistic growth figures could have the opposite effect and increase hopes that Britain was in a good economic position to handle Brexit damage.
Key Eurozone data follows a little later in the week. Thursday will see the release of Germany’s July labour report, as well as Germany’s preliminary July inflation figures. If these figures beat out expectations, Euro sentiment would increase further and weigh on the Pound Euro exchange rate.