- Pound Euro Exchange Rate Trends around 1.17 – Slips back to lows on Thursday
- Eurozone Growth Solid – But political jitters weigh on Euro strength
- Key UK Services Data Impress – But Euro holds back Pound
- Forecast: French Election on Sunday – Retail data could also influence Euro
Pound Euro Exchange Rate Edges Up from Lows
The Pound continued to benefit from French political jitters throughout Friday’s European session, but the Pound Euro exchange rate ended the week almost a cent below the week’s opening levels.
Demand for the Euro was bolstered slightly on Friday by Markit’s April retail PMI for the Eurozone bloc, which improved from 49.5 to 52.7. However, this was likely offset by Germany’s latest construction PMI which slowed in April.
Monday will see massive movement from the Pound Euro exchange rate.
Investors will be reacting to Sunday’s French Presidential election. If pro-EU Emmanuel Macron wins as predicted, the Euro will see a relief rally and its long-term outlook will improve.
However, a win for the anti-EU Marine Le Pen would cause the Euro to plummet when markets open on Monday.
[Previously updated 12:55 BST 05/05/2017]
After hitting a fresh weekly low of 1.17 on Friday morning, the Pound Euro exchange rate edged away from its lowest levels in the first half of the day’s European trade session.
While the day’s Eurozone ecostats were generally and the Pound lacked fresh supportive news, French election jitters kept the Euro from holding its best levels.
Overall though, the Pound Euro exchange rate has trended over half a cent below the week’s opening levels for most of Friday so far. As it stands, GBP EUR is likely to end the week lower despite French election concerns.
Euro selloffs may have been limited by news that pro-EU French election candidate Emmanuel Macron had seen an increase in support following this week’s televised French Presidential debate.
[Previously updated 16:40 BST 04/05/2017]
Pound Euro Exchange Rate Slips on Thursday
Amid market anticipation for this weekend’s French Presidential election, the Pound Euro exchange rate touched lows of 1.17 on Thursday.
The Euro strengthened throughout the day, but GBP EUR losses were limited thanks to the day’s UK data and a sturdy Pound.
Britain’s key services PMI for April came in at 55.8, rising from the previous figure of 55 and beating the expected drop to 54.5. Britain’s composite PMI rose from 54.9 to a strong 56.2.
A lack of UK data on Friday means the Euro is likely to drive Pound Euro exchange rate movement. As Friday is the last market session before Sunday’s French election, political jitters could weaken the Euro slightly.
[Previously updated 12:10 BST 04/05/2017]
Despite a hat-trick of better-than-expected UK PMI this week, Thursday saw the Pound Euro exchange rate fall to its worst levels since last week due to an increase in Euro demand.
On Wednesday night, French Presidential election candidates Emmanuel Macron and Marine Le Pen took part in the final TV debate of the election.
After over an hour of mud-slinging, 63% of viewers considered Macron to be the ‘most convincing’ candidate, bolstering market hopes that he would win the election.
As a result of increasing hopes for a Macron win this coming Sunday, GBP EUR fell despite news that Britain’s anticipated services PMI had unexpectedly improved in April.
[Published 06:00 BST 04/05/2017]
After falling earlier in the week, the Pound Euro exchange rate saw a mixed recovery on Wednesday. Hopes for UK data and Eurozone political jitters allowed the pair to recover from its weekly lows, but Brexit concerns limited the Pound’s gains.
GBP EUR has spent most of the week trending in the region of 1.18, though the pair is still a third of a cent below the week’s highs. GBP EUR briefly fell to a low of 1.17 on Tuesday afternoon.
Pound (GBP) Sturdy as Investors await Services Data
After strong UK manufacturing and construction PMI datasets earlier in the week, investors have been increasingly hopeful that Britain’s services sector may have also outperformed expectations in April.
UK manufacturing came in well above expectations on Monday, largely due to the Pound’s drop in value making UK exports more competitive.
Then on Tuesday, Britain’s construction PMI impressed by unexpectedly rising to 53.1, despite being expected to slow from 52.2 to 52.
However, despite the optimistic results, analysts have remained cautious due to Britain’s Brexit process. Paul Trigg from trade credit insurer Euler Hermes stated;
‘The outcome of the Brexit negotiations will be particularly key for construction, given its reliance on migrant labour and raw materials from overseas. Further rises in input costs due to more expensive recruitment and import costs will squeeze margins that are already under pressure, pushing up the strain on prompt payments across the supply chain and potentially the number of business failures in the industry.’
As UK construction isn’t typically influential for GBP trade, investors opted to wait for services data before making any big Pound movements.
Sterling’s strength was also held back by fresh Brexit jitters, as UK Prime Minister Theresa May appeared to have rocky informal talks with European Commission leader Jean-Claude Juncker last week.
Euro (EUR) Holds Ground as Eurozone Growth Improves
The GBP EUR exchange rate has only regained around half of this week’s losses. While this is partially due to Brexit concerns holding back the Pound, this week’s solid Eurozone data has also strengthened the shared currency.
Wednesday saw the publication of the Eurozone’s preliminary Q1 Gross Domestic Product (GDP) results. These met expectations of 0.5% quarter-on-quarter and 1.7% year-on-year.
Analysts were largely upbeat in response to the results, claiming that the Eurozone economy is on track to have a decent 2017. According to Shilen Shah from Investec Wealth & Investment;
‘Despite the political headwinds facing the Eurozone in 2017, it produced a decent GDP print for the first quarter at 0.5%. In contrast to the more tepid performance in the UK and US, the Eurozone’s performance does suggest that rest of the year is likely to be solid given the supportive PMI prints.’
The political headwind Shah speaks of is of course the French Presidential election, and to a lesser extent the German election later in the year.
While pro-EU centrist Emmanuel Macron remains the favourite to win this weekend’s French election, the possibility that anti-EU Marine Le Pen could still win has limited the Euro’s strength this week.
Pound Euro Exchange Rate Forecast: UK Services Stats in Focus
UK manufacturing and construction PMIs may have beaten expectations earlier in the week, but if Britain’s services sector fails to meet expectations the Pound is likely to fall regardless.
Services make up most of Britain’s economic activity. Analysts have been increasingly concerned this year that the drop in the Pound’s value has increased inflation so much that it has put consumers off spending.
This, coupled with slowing wage growth, remains a notable concern for Britain’s economy. As a result, a worse-than-expected UK services PMI on Thursday would cause GBP EUR to fall regardless of Euro political jitters.
On the other hand, if services rounds off a hat trick of better than expected UK PMIs for April, the Pound to Euro exchange rate is likely to advance and could continue firming on Friday.
The week’s remaining Eurozone news isn’t as high influence. Eurozone composite PMIs and retail sales data due on Thursday could give the shared currency some support if it beats expectations.
However, ultimately the second round of the French Presidential election, which takes place on the 7th of May, is likely to weigh on the Euro and will limit Pound Euro exchange rate weakness for the rest of the week.