With UK Consumer Confidence improving by more-than-expected, the Pound Euro exchange rate recovery continued on Wednesday, with the pairing advancing to a high of 1.1801. This was GBP/EUR’s strongest level since the beginning of August and close to its post-Brexit high of 1.20.
- Pound Euro Exchange Rate Holds Above 1.18 – Can it hold above this level for the rest of the week?
- German Inflation Slows More than Expected – Stagnant in flash August figures
- Update: UK Manufacturing PMI Impresses – Positive result boosts Sterling
- Forecast: UK Construction PMI Ahead – Unlikely to undermine Sterling levels
Pound Euro Exchange Rate Surges on UK Manufacturing Scores
The Pound to Euro exchange rate soared on Thursday morning and was able to sustain most of these gains throughout the day thanks to a far higher than expected UK Manufacturing score for August.
Markit’s August Manufacturing PMI was expected to print a softened contraction from 48.3 to 49, but instead came in with a surprising growth of 53.3.
The Euro, on the other hand, was initially held back as Eurozone Manufacturing failed to meet preliminary August scores of 51.8, instead printing at 51.7. This allowed GBP/EUR to capitalise earlier in the day.
However, while the pair briefly reached as high as 1.1920, it struggled to hold above 1.19 later in the afternoon as disappointing US data caused some investors to sell off the US Dollar in favour of the Euro, strengthening the shared currency.
(Previously updated 8:50 BST 01/09/2016)
The Pound Euro exchange rate was trending in the region of 1.18 as Thursday’s European session got underway and investors looked ahead to the publication of the UK’s Manufacturing PMI for August. If the data beats forecasts and edges above the 50 mark separating growth from contraction, Sterling could rally to new highs against its European counterpart.
(Previously updated 31/08/2016)
The GfK gauge of sentiment advanced from -12 to -7 rather than improving to -8 as forecast.
According to Joe Staton at GfK; ‘The uptick in confidence is driven by good news from hard data, the combination of historic low interest rates matched with falling prices and high levels of employment. Brits are clearly determined to carry on shopping for today rather than saving for tomorrow.’
Meanwhile, the UK Lloyds Business Barometer for August dropped from 29 to 16.
In the main, UK data has surprised to the upside since Britain opted to break from the EU in late June. Recent employment and retail sales numbers were particularly notable. While there are concerns that the situation could swiftly and dramatically reverse in the near future, for the time being investors are being moderately cheered by the results.
(Previously updated 08:00 GMT)
Tuesday’s poor UK data was unable to keep the Pound Euro exchange rate from continuing its attempts to advance on Tuesday afternoon. The exchange rate slipped on Monday during quiet UK bank holiday trade, but continued its rebound on Tuesday thanks to disappointing Eurozone news.
GBP/EUR slumped on Monday as Britain’s bank holiday led to quiet Sterling trade throughout the day, slipping from the week’s opening levels of 1.1734 to a low of 1.1696 on Tuesday. Since then, the pair has attempted to advance past the week’s opening levels to above 1.1740.
Pound (GBP) Edges Higher Despite Underwhelming Data
Pound Sterling (GBP) exchange rates continued to be bought up from low levels on Tuesday as investors speculated that the shock of the Brexit vote would not harm Britain’s economy as immediately as previously expected.
GBP/EUR briefly climbed above 1.1760 on Tuesday afternoon but struggled to hold this level due to the limited nature of the Pound’s advances.
While Sterling rallied for much of last week and Tuesday, GBP demand remained mixed with investors ready to begin a selloff at any moment.
Recent data also failed to inspire investors. Consumer credit fell from 1.857b to 1.181b in July according to a Tuesday print, while mortgage approvals plummeted from 64.15k to 60.91k.
Reports following the dataset saw analysts claiming that the UK’s economy will feel more of a slow burn than a sharp hit. Reuters reported;
‘Bank of England lending data on Tuesday offered the first hint of vulnerability in consumer demand – a key engine of British economic growth – after strong high street sales yielded no sign of a Brexit-inspired immediate slowdown.
Lending to consumers rose by 1.2 billion pounds in July, below all forecasts in a Reuters poll of economists and the weakest increase since August 2015. The figure was down from 1.9 billion pounds in June.’
Euro Exchange (EUR) Rates Struggle As German Inflation Fails to Meet Expectations
Euro exchange rates failed to hold their ground on Tuesday after last week’s drop in demand as Eurozone data disappointed investors.
While German import prices came in better-than-expected, only contracting -3.8% despite an expected contraction of -4.0%, Eurozone confidence and German inflation was down across the board.
To some analysts, this indicated that the Eurozone bloc was experiencing a delayed Brexit shockwave of sorts, and the Euro slipped. The Financial Times reported;
‘Economic and business confidence in the Eurozone has declined abruptly in August, in one of the first signs that concerns over the UK’s Brexit vote may be starting to bite on the continent. …
Business sentiment in the single currency area fell sharply to a near three-year low in August, tumbling from a reading of 0.38 to just 0.02 this month. Economists has forecast a moderate fall to 0.36 from July – the first full month after the UK’s EU membership referendum.’
The Euro’s Tuesday drop worsened in the afternoon, following the publication of Germany’s preliminary August Consumer Price Index (CPI) report.
Inflation was expected to slow from 0.3% to 0.1% month-on-month, and improve from 0.4% to 0.5% year-on-year. Unfortunately, monthly stagnation of 0.0% and a yearly score staying at 0.4% weighed heavily on Euro demand throughout the day.
Pound Euro Exchange Rate Forecast: Slew of Vital Eurozone Data to Impact GBP/EUR Today
The Euro is likely to lead GBP/EUR movement on Wednesday, as a slew of highly anticipated Eurozone datasets will be published in the morning and set the Euro’s tone for the rest of the day – potentially even the rest of the week.
While Nationwide’s August house price report will be published, this data is unlikely to be highly influential as it will be quickly followed by key Eurozone prints including German retail, German unemployment, Eurozone unemployment and Eurozone inflation.
The German unemployment and Eurozone CPI figures will be the most influential of the day, as they will show August activity. Germany’s unemployment rate is expected to have held at 6.1% in August, and Eurozone CPI is expected to have improved slightly from 0.2% to 0.3% month-on-month.
If these figures fail to meet expectations, the Euro could struggle for the rest of the week. Germany’s July retail sales and Eurozone unemployment for July could also prove influential if they reveal a positive or negative trend for the currency bloc.
Data due for publication later in the week includes Britain’s August Manufacturing and Construction PMIs, as well as final August PMIs for the Eurozone. However, it is Wednesday’s session that has the most potential to influence this week’s Pound Euro rate.