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Pound to Euro Advance Slips amid Mixed UK Growth Results

The Pound to Euro exchange rate was unable to hold its daily highs on Wednesday afternoon but remained above the level of 1.18.

While political concerns continued to prevent the Euro from making a solid data-inspired recovery, the day’s Eurozone data was still impressive enough to hold the Pound back.

Ifo’s February business sentiment surveys for Germany beat projections in all prints. Business climate rose from 109.9 to 111, expectations from 103.2 to 104 and current conditions from 116.9 to 118.4.

The Eurozone’s final January Consumer Price Index (CPI) figures met projections, with 1.8% year-on-year and -0.8% month-on-month.

GBP EUR could continue to shed its weekly gains on Thursday and Friday if the Euro’s Marine Le Pen jitters cool and the Germany’s final Q4 growth figures impress.

[Previously updated 12:41 GMT 22/02/2017]

The Pound to Euro exchange rate remained within the region of 1.18 on Wednesday. This week’s Pound rally came to an end as the day’s Q4 UK Gross Domestic Product (GDP) results failed to impress.

British growth beat expectations quarter-on-quarter, improving from 0.6% to 0.7%. However, the yearly growth rate was revised down from 2.2% to 2% according to the report.

This, as well as ongoing concerns about slowing activity in Britain’s retail sector, put an end to the Pound’s bullishness this week.

However, as Eurozone political concerns remained high the Pound was able to hold most of Monday and Tuesday’s gains against the Euro. This left GBP EUR near its best levels in two months.

[Previously updated 16:45 GMT 22/02/2017]

The Pound to Euro exchange rate extended its gains on Tuesday afternoon, as the House of Lords reconvened for another debate on Article 50 and the beginning of the Brexit process.

Due to continued concerns about the popularity of nationalist politician Marine Le Pen in France, investors largely brushed over Tuesday’s impressive Eurozone PMIs.

Markit’s preliminary February PMIs for the bloc largely came in above expectations. Most notable was Germany and the Eurozone’s prints, all of which beat expectations.

While this increased hopes that the Eurozone economy was strongly performing, concerns that nationalist politicians could try to withdraw their nations from the currency bloc have weighed heavily on EUR demand.

[Previously updated 12:45 GMT 21/02/2017]

After holding its daily highs on Monday, the Pound to Euro exchange rate advanced again on Tuesday. Investors were impressed by the day’s UK public sector net borrowing results.

The Office for National Statistics (ONS) printed an improvement from -£4.24b to £9.82b in January. This was Britain’s biggest borrowing surplus in 17 years (since 2000) and bolstered hopes that the government could meet deficit targets for the fiscal year.

This figure helped Sterling to hold its ground against the Euro, which was weakened once again by the perceived rising popularity of nationalist French Presidential candidate Marine Le Pen.

As a result of ongoing political concerns weakening the Euro, the shared currency was unable to benefit from the day’s Eurozone PMI results.

[Published 06:00 GMT 21/02/2017]

The Pound to Euro exchange rate advanced on Monday. The possibility of the UK House of Lords amending the Article 50 bill before it is passed left investors excited.

A lack of fresh ecostats on Monday left traders reacting to the latest Brexit speculation and Eurozone political concerns.

Most of the day’s GBP EUR movement revolved around comments made by Labour Lord Peter Mandelson on Sunday.

In an interview with the BBC, Mandelson stated he had confidence that peers in the House of Lords would fight for the rights of EU nationals living in the UK, as well as further input from MPs on the final Brexit deal. He stated;

‘The government used its majority to bulldoze the legislation through the House of Commons. I hope it won’t be so successful in the House of Lords.

At the end of the day the House of Commons, because it is the elected chamber, will prevail but I hope the House of Lords will not throw in the towel early.’

As traders have been concerned in the past that businesses and workers could lose jobs if the status of EU nationals in the UK came into question, this bolstered Sterling demand.

Some investors also continued to hope that Lords could make fighting for single market access a key condition of Article 50 activation.

If amendments are made to the Article 50 bill on Tuesday before the House of Lords debates end, the House of Commons must debate the bill once more before it can be passed.

The Pound could quickly shed its Monday gains against the Euro if the House of Lords makes no amendments to the Article 50 bill.

Prime Minister Theresa May’s government expects the bill will pass through Parliament smoothly.

The UK government plans to activate Article 50 in March. The House of Lords’ scrutiny is the final stage of Parliament it must go through before activation and Tuesday is the final day of debate.

Tuesday’s session will also see the publication of Britain’s January public sector net borrowing results. Investors expect borrowing to have improved considerably due to tax returns being posted in January.

The figure is expected to improve from -£6.42b to £14.4b. If it improves even further than expected, it will increase hopes that Britain may not see as big borrowing concerns in 2017 as previously expected.

Bank of England (BoE) Governor Mark Carney will speak in UK Parliament on Tuesday too. If Carney is once again dovish on Britain’s monetary policy outlook, the Pound will plunge as investors rein back recent hopes of higher UK interest rates.

Tuesday’s European session will also be vital for Euro trade. Markit will publish its preliminary Eurozone PMIs from February on Tuesday morning, including French, German and Eurozone prints.

However, even if economic sectors beat expectations in February, the shared currency may see continued pressure from concerns of rising populism in the Eurozone.

French government bonds were sold off on Monday as traders became concerned about the rising popularity of nationalist politician Marine Le Pen.

Concerns also remained about Greece’s ongoing debt issues, but Eurogroup President Jeroen Dijsselbloem stated on Monday that there was no new crisis or urgency in regards to Greece.

These elements left Euro demand limp, with the Pound’s Article 50 hopes strength causing most of the day’s movement.

Other key UK and Eurozone data will publish throughout the week. Wednesday’s session in particular is likely to influence GBP EUR movement.

Analysts predict Britain’s preliminary Q4 Gross Domestic Product (GDP) results will remain at 2.2% year-on-year and 0.6% month-on-month.

The IFO will publish German business confidence results from February on Wednesday and later in the day the Eurozone’s key January Consumer Price Index (CPI) results are due.

Analysts expect yearly inflation will come in at 1.8% as preliminary figures did. The month-on-month figure is projected to fall from 0.5% to -0.8%.

If Eurozone inflation comes in better than expected, the shared currency could strengthen later in the week as investors become increasingly hopeful that Eurozone inflationary pressures are improving.

This, as well as the possibility of disappointing UK ecostats and Article 50 news could leave the Pound to Euro exchange rate lower this week.