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Pound to Euro (GBP/EUR) Exchange Rate Edges Away from Worst Levels Amid Solid UK Borrowing Data

Pound to Euro (GBP/EUR) Exchange Rate Tight as US Dollar (USD) Weakness Bolsters Both Currencies

Since markets opened this week, the Pound Sterling to Euro (GBP/EUR) exchange rate has largely trended with an upside bias – but its movement has been tight amid a lack of reasons to buy the Brexit-battered Pound (GBP).

GBP/EUR tumbled last week, from the level of 1.1186 to around 1.1136. On Tuesday, GBP/EUR briefly touched on a low of 1.1118 but the pair has largely been trending closer to the level of 1.1150.

This tight movement is likely to continue unless there is some notable development in the Brexit process or a shift in direction for Euro (EUR) exchange rates.

While some investors have bought the Pound back from its cheapest levels, the Euro has been benefitting more than the Pound from US Dollar weakness. Generally though, both currencies have benefitted somewhat from weakness in the US Dollar (USD) in recent sessions.

Pound (GBP) Exchange Rates Avoid Further Falls as UK Borrowing Stats Beat Forecasts

Persistent fears that a ‘no deal’ Brexit is possible continue to put a lid on the Pound’s potential for gains, but Sterling still benefits slightly from decent UK data – at least enough to avoid further losses.

Investors kept the Pound from falling any further on Tuesday, as July’s UK public sector net borrowing results came in with a bigger surplus than expected.,

The figure was forecast to improve from £-3.313b to £2.3b, but instead climbed to £2.872b.

It was the best July borrowing surplus for 18 years, and analysts expect it will give the UK Treasury some extra wiggle room in autumn’s upcoming UK Budget.

Investors were unsurprised by August’s disappointing factory report from the Confederation of British Industry (CBI), as Brexit uncertainties are already expected to weigh on economic activity until some more clarity on the Brexit process is offered.

Euro (EUR) Exchange Rates Finds Support in Broad US Dollar (USD) Weakness

The Euro was able to hold against the Pound’s recovery attempts on Tuesday, as it was likely the currency to have benefitted most strongly from the latest US Dollar (USD) weakness.

Fresh market jitters over US politics and how they may impact US monetary policy have prompted a US Dollar selloff this week.

Criticism towards Federal Reserve Chairman Jerome Powell from US President Donald Trump over rising US interest rates made investors concerned that the US President could try to undermine the Federal Reserve’s independence.

The US Dollar was also weakened by domestic political risks, amid news that old Trump allies had been found guilty through special counsel Robert Mueller’s ongoing investigation into Russian interference in the 2016 US Presidential Election.

As the Euro is the US Dollar’s biggest rival, it has benefitted notably from US Dollar weakness, though its own gains have been limited by ongoing concerns about a potential Turkish currency crisis.

Pound to Euro (GBP/EUR) Forecast: Key Eurozone Growth Stats Ahead

The Pound to Euro (GBP/EUR) exchange rate’s movement has been tight so far this week, as Brexit jitters prevent the Pound from recovering and investors are hesitant to buy the Euro much higher versus the weak Pound.

However, the Euro could be more strongly influenced by Eurozone data towards the end of the week could cause a shift in direction for GBP/EUR.

Thursday will see the publication of the Eurozone’s August PMI projections from Markit, which will give investors a better idea of how the Eurozone’s economy has been performing this month.

If the data beats expectations, investors may speculate that the Eurozone’s economy has been more resilient amid US trade protectionism than expected. It could even bolster European Central Bank (ECB) interest rate hike bets.

The Eurozone’s August consumer confidence projections will be published on Thursday too, and Friday will follow with Germany’s final Q2 Gross Domestic Product (GDP) results.

If the Eurozone’s growth outlook is better than expected following this week’s data, the Pound to Euro (GBP/EUR) exchange rate will struggle even more to recover unless there are some considerable optimistic developments in the Brexit process.