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Pound Euro Exchange Rate Recovery Limited by Optimistic Eurozone Data

  • Pound Euro Exchange Rate Remains Near 1.14 – Recovery boosted by Brexit news
  • Hawkish Haldane Fails to Boost Pound Significantly – Pound weak despite BoE split
  • Eurozone PMIs Mixed – Eurozone’s economic activity sees strong Q2
  • GBP Forecast: Could Conservatives Strike DUP Deal? – Sterling could strengthen

Pound Euro Exchange Rate Recovery Falls Flat

After recovering on Friday morning, the Pound Euro exchange rate slipped again and looked the end the week’s European session lower, in the region of 1.13.

While the Eurozone’s preliminary June PMIs were mixed on Friday, they improved the Eurozone outlook overall by indicating that the bloc saw strong economic performance throughout Q2.

Markit chief economist Chris Williamson suggested in the report that the Eurozone could be on track to see Q2 growth of 0.7%, following the Eurozone’s solid 0.6% in Q1.

However, the Euro is unlikely to see much stronger demand any time soon unless Eurozone data beats expectations. The next main event for Euro traders will be next week’s preliminary German inflation stats from June.

[Previously updated 12:56 BST 23/06/2017]

The Pound Euro exchange rate saw an increase in demand on Friday morning as investors reacted to Brexit developments overnight.

During a Brussels summit, UK Prime Minister Theresa May laid out a ‘fair and serious’ offer to secure the rights of EU citizens living in Britain.

She intended that EU citizens living in the UK legally before the Brexit process is completed will be able to build up to having all the rights and benefits of a British citizen.

While her idea was met with mixed reception, it was enough to cheer GBP traders slightly. Investors are now less worried that businesses will lose EU employees during the Brexit process.

The Eurozone’s preliminary June PMIs from Markit rounded off a strong Q2 for the Eurozone. However, as they fell short of expectations the Euro failed to capitalise and GBP EUR recovered to above 1.14.

[Published 06:00 BST 23/06/2017]

Demand for the Pound Euro exchange rate remained limp on Thursday despite this week’s hawkish comments from Bank of England (BoE) chief economist Andy Haldane. Market uncertainty about Britain’s political and economic outlooks has kept Sterling under pressure.

GBP EUR began the week trading at the level of 1.1420. Despite speculation that the BoE could tighten UK monetary policy by the end of the year the pair has largely trended in the region of 1.1350 since Wednesday.

Pound (GBP) Fails to Benefit Notably from BoE Speculation

While the Pound has recovered slightly from its worst weekly levels, the boost it received following this week’s hawkish comments from Bank of England (BoE) chief economist Andy Haldane was short lived.

The British currency trended largely flatly on Thursday amid a lack of fresh influential developments.

Despite some analysts claiming that there was a 50/50 chance of a UK interest rate hike taking place before the end of the year, investors have been mixed on the Pound.

Other analysts have suggested that Haldane’s comments that rates may need to be hiked by the end of the year may have simply been an attempt to boost the Pound and weaken inflation.

There also remains the possibility that Britain’s economic data could worsen later in the year and make Haldane more dovish again, or that there may simply not be enough hawkish members in the Monetary Policy Committee (MPC) to contest BoE Governor Carney’s more dovish stance.

The Confederation of British Industry (CBI) published its UK industrial trends orders report for June on Thursday, showing a surprising jump from 9 to 16. According to the report, orders climbed to the highest level since 1988.

However, other analysts have argued the CBI may be overoptimistic about Britain’s economy.  According to Howard Archer, economic advisor to the EY ITEM Club;

‘Indeed, official data suggests that the manufacturing sector is far from guaranteed to see even modest growth in the second quarter. Specifically, latest ONS figures show manufacturing output edged up 0.2% month-on-month in April after falling in each of the first three months of 2017. Consequently, manufacturing output was down by 0.7% in the three months to April compared to the three months to January.’

Euro (EUR) Sturdy on Resilient Eurozone Recovery

Demand for the Euro has been steady over the last week. While a lack of fresh and strong Eurozone ecostats has limited the shared currency’s gains, it has largely held onto its recent highs due to market confidence in the bloc.

The past week has seen French President Emmanuel Macron’s party win big in French legislative elections. German Chancellor Angela Merkel has indicated she would even be willing to back his proposals to reform the Eurozone with a shared finance minister and budget under the right circumstances.

This has made investors more optimistic about the currency bloc’s political outlook.

The Eurozone’s economic recovery also continues to improve according to the European Central Bank (ECB).

In its latest economic bulletin, the ECB stated the Eurozone’s recovery was ‘increasingly resilient’ and noted that Q2 growth in the bloc was looking strong. Growth is mostly being supported domestically, but improvements in other major economies are helping too.

On the other hand, the inflation outlook is being dampened by weaker energy prices.

Pound Euro Exchange Rate Forecast: Eurozone PMIs in Focus

Friday will finally see some more inspired Euro trade, as June’s highly anticipated Eurozone preliminary PMIs from Markit will be published.

These figures will give markets a better idea of how the Eurozone’s economy has been performing this month. They have the potential to be the main driver of Pound Euro exchange rate movement towards the end of the week.

Analysts expect the PMIs to have slipped slightly after the strong performances in April and May, but worse-than-expected PMIs would weaken the Euro and help the Pound to rise.

Other notable Eurozone data is due for publication on Friday too, including final Q1 Gross Domestic Product (GDP) results from The Netherlands and France.

There won’t be any key ecostats published for Britain until next week’s consumer confidence survey is published by GfK, but any developments in Britain’s political situation could still influence Pound trade.

Speculation continues about whether or not the Conservative party will reach a deal with Northern Ireland’s Democratic Unionist Party (DUP). If a deal is indeed announced, markets will perceive stronger UK stability for now and the Pound Euro exchange rate will rise.