Pound to Euro Exchange Rate Trends Near Weekly Lows Following Underwhelming UK Services
Despite a brief jump on Wednesday in reaction to some stronger-than-expected UK construction data, the Pound to Euro (GBP/EUR) exchange rate was unable to sustain its best levels and traded lower even after Thursday’s key data was published.
So far this week, GBP/EUR has fluctuated between highs of 1.1407 and lows of 1.1328. It hit a weekly low on Wednesday morning and trended near that level again on Thursday morning.
Markit’s latest UK manufacturing and construction PMIs from April gave investors a mixed outlook on how Britain’s economy was performing in April.
As a result, investors anticipated Britain’s key services PMI before making any major moves on Sterling (GBP).
The PMI was forecast to have improved slightly from 51.7 to 53.5, but instead printed at 52.8. While the figure did improve, it was not as solid as analysts expected and this limited Pound appeal.
Pound (GBP) Exchange Rate Outlook Murky as UK Data Comes in Mixed
Since mid-April, UK data has fallen well short of expectations and has largely bets of a potential May interest rate hike from the Bank of England (BoE) to fade.
First, UK inflation fell more than expected, then Britain’s Q1 growth projections came in lower than forecast too.
This data essentially indicated that in early 2018, Britain’s economic performance was slowing more than expected rather than remaining resilient amid the Brexit process.
Britain’s manufacturing PMI from April caused further worries, indicating that Britain’s economy continued to see below trend performance and showing that the Q1 slowdown may have been a more underlying issue rather than a temporary blip.
Euro (EUR) Fails to Capitalise on Pound Weakness as Eurozone Inflation Disappoints
Thursday saw the publication of yet another influential Eurozone dataset: April’s Consumer Price Index (CPI) projections.
Eurozone inflation was forecast to have remained at 1.3% year-on-year in April, but the figure instead slipped to 1.2%.
Even the bloc’s core inflation figure disappointed, sliding from 1% to 0.7% rather than the forecast 0.9%.
The data indicated that the Eurozone’s price pressures were still more subdued than investors expected. This further doused market speculation that the European Central Bank (ECB) could be headed towards tightening Eurozone monetary policy any time soon.
It followed this week’s other major Eurozone stats. While most of the week’s inflation data has been underwhelming, Eurozone growth is projected to have been solid overall and the bloc’s manufacturing PMI beat expectations in April.
Pound to Euro (GBP/EUR) Forecast: Eurozone PMI and Retail Stats Still Ahead
This has been a big week for Eurozone data, but there’s one final slew of ecostats from the bloc on the way before markets close this week.
While Thursday’s data was likely the most influential, Friday’s Eurozone stats could still influence some late-week movement in the Pound to Euro (GBP/EUR) exchange rate.
The Eurozone’s final April services and composite PMIs will be published. As the bloc’s manufacturing PMI beat expectations earlier in the week, this could support the Euro (EUR) too if it impresses investors.
March’s Eurozone retail sales results will be published too. Month-on-month retail sales are forecast to have risen from 0.1% to 0.5%, with yearly sales forecast to rise from 1.8% to 1.9%.
Amid a lack of UK data due for publication until next week, political news such as Brexit developments could inspire Pound movement instead.
Of course, next week will see the Bank of England (BoE) hold its much-speculated-on May policy decision.
The bank is no longer expected to hike UK interest rates at the meeting, but any perceived shifts in tone from the bank could still be highly influential to the Pound to Euro (GBP/EUR) exchange rate outlook.