Pound to Euro Exchange Rate Nears Monthly Best thanks to Brexit Speculation
Despite a lack of solid Brexit developments in recent weeks, investors poured into the Pound (GBP) yesterday thanks to the latest Brexit speculation, and this left the Pound Sterling to Euro (GBP/EUR) exchange rate near its best levels since early-April.
Following last week’s modest GBP/EUR gains from 1.1553 to 1.1573 on the back of disappointing Eurozone data, the pair is seemingly in for further gains this week.
GBP/EUR touched on a high of 1.1640 this morning, the pair’s best level since the 5th of April. At the time of writing, GBP/EUR trended a little closer to the level of 1.1633 instead.
Still, while the Pound has benefitted from Euro (EUR) weakness, its gains may prove temporary if the latest Brexit hopes unwind.
The Euro, on the other hand, has seen its support improve slightly in recent sessions, but demand remains limited due to concerns about the Eurozone economic outlook.
Pound (GBP) Exchange Rates Steady Following Tuesday’s Brexit Gains
Yesterday’s biggest major currency movement was a surge in demand for the Pound, and this came despite a lack of solid support in UK data or politics this week so far.
Instead, the jump in demand for the Pound was driven by fresh speculation about ongoing Brexit negotiations, between the UK government and the opposition Labour Party.
For weeks now, officials and analysts have been doubtful that the talks will lead to anything substantial like a new softer Brexit deal.
However, reports this week have claimed that officials have recently become notably more optimistic on talks, bolstering hopes that a soft Brexit deal could be agreed and would be more likely to pass through Parliament.
Many analysts still believe that a successful agreement is unlikely within the next week though.
Euro (EUR) Exchange Rate Investors Remain Cautious despite Stronger Eurozone Data
Last week, the Euro tumbled as investors became more anxious that the Eurozone economy was still being negatively affected by an ongoing global economic slowdown. This was due to many Eurozone confidence figures falling short of forecasts.
This uncertainty continues to weigh on the Euro this week too, despite most of this week’s most influential Eurozone prints showing that things may not actually be as bearish as feared for the bloc’s economy.
Yesterday saw the publication of a slew of stats, including Eurozone growth figures and German inflation. Many of these figures beat forecasts, bolstering hopes that the Eurozone’s economic activity was improving.
Eurozone growth is projected to have improved from 0.2% to 0.4% quarter-on-quarter in Q1, with the yearly figure expected to remain at 1.2% instead of sliding to 1.1%.
Germany’s inflation report was impressive too, with the monthly figure unexpectedly jumping to 1.0% and the yearly figure at 2.0%.
Despite this though, investors were hesitant to buy the Euro back from its lows ahead of tomorrow’s Eurozone manufacturing data. The manufacturing projections seen a couple of weeks ago were highly concerning for the Eurozone manufacturing outlook.
Pound to Euro (GBP/EUR) Exchange Rate Investors Anticipate Further Eurozone Stats
Unless there are more solid Brexit developments in the coming sessions, the Pound could become limper and the Pound to Euro (GBP/EUR) exchange rate may be driven more by Euro movement.
Investors are hesitant to buy the Euro back from its lows just yet, as while Tuesday’s Eurozone data impressed there are more major ecostats due for publication before the end of the week.
Thursday’s key Eurozone data includes German retail sales results, and the Eurozone’s final April manufacturing PMIs.
If these stats confirm weaker economic activity, as many analysts predict, investors will remain concerned about the Eurozone’s economic outlook and the Euro’s potential for recovery versus the Pound will be limited.
Eurozone’s April inflation projections, due for publication on Friday, are expected to show improvement. If these disappoint however, much of the hopes from Tuesday’s data could be doused.
Thursday will also see the Bank of England (BoE) hold its May policy decision, but unless the bank’s tone on Britain’s outlook is particularly surprising the Pound to Euro (GBP/EUR) exchange rate will focus on Eurozone data.