Markets remain focussed on the weakening economic outlook for the UK and the approaching Spring Budget, keeping the Pound Euro exchange rate on the decline.
Investors are waiting to see what measures Chancellor of the Exchequer Philip Hammond will take to prepare the nation for Brexit. While economists largely agree that this budget will be a ‘dull’ affair, it could pave the way for more drastic changes later in the year.
Additionally, investors remain wary of the Pound thanks to the weak data released before the weekend.
Both the service and composite PMIs performed worse than was expected, seemingly confirming fears that the UK economy is set to slow during the first quarter of 2017 as consumer spending weakens in the face of surging inflation.
Tomorrow’s early like-for-like retail sales figures from the British Retail Consortium (BRC) could advance this viewpoint further if they continue to show a decline as forecast.
Retail data has also harmed the Eurozone outlook today, curbing the extent of Pound weakness against the Euro.
Strength in Germany was undone by weaker-than-expected PMI results for France and Italy, with the latter falling to a five-month low of 45.5. This dragged the Eurozone-wide survey into contraction territory as well with a score of 49.9.
Contraction has been the word of the day when it comes to what investors have been focussing on lately; finalised Greek GDP figures were revised much lower, showing quarter-on-quarter contraction of -1.2% instead of the estimated -0.4%. Year-on-year figures showed a -1.1% decline against predictions of 0.3% growth.
Investors will be worried that this latest revision will have a negative impact upon the finalised Eurozone GDP figures for the same period, which are released tomorrow morning.
Growth is expected to reprint at 0.4% on the quarter and at 1.7% on the year. However, while an unanticipated downwards revision would be bearish for the Euro, trader focus on Wednesday’s UK Budget could see the Pound unable to fully capitalise on weakness in the common currency.