- Pound Euro Exchange Rate Near 1.12 – Emerges from 2017 lows
- Eurozone PMIs Fall Short – Euro sold from highs as PMIs miss the mark
- UK Growth Meets Forecasts – Sterling recovers from lows
- EUR Forecast: German Inflation on Friday – As well as Eurozone business confidence
The Pound Euro exchange rate continued to emerge from its lows towards the end of Wednesday’s European session, as investors bought the Pound back following weeks of concerning domestic news.
This was partially because Britain’s Q2 Gross Domestic Product (GDP) projection met expectations, and also because investors had little new reason to sell Sterling.
GBP EUR is unlikely to see much movement on Thursday.
However, a slew of key Eurozone ecostats will be published on Friday that are likely to inspire Euro trade. This will include Germany’s July inflation projections.
[Previously updated 12:47 BST 26/07/2017]
Relieved Sterling investors continued to buy the British currency up from its lows on Wednesday, as Britain’s Q2 Gross Domestic Product (GDP) growth projections met analysts expectations.
Recent UK retail data had fallen short of expectations, so investors were worried that UK growth could also disappoint.
However, quarter-on-quarter growth is projected to improve from 0.2% to 0.3% as expected, with yearly growth on track to meet forecasts and slip from 2% to 1.7%.
While not a particularly impressive report, it helped the Pound Euro exchange rate to recover to above the level of 1.12, where it trended at the time of writing.
[Previously updated 16:29 BST 25/07/2017]
The Pound Euro exchange rate fluctuated within a relatively tight range throughout Tuesday trade. Sterling’s recovery was kept at bay below psychological resistance levels as investors awaited more reasons to buy the Pound.
That could come in the form of Britain’s Q2 Gross Domestic Product (GDP) results, which will be published tomorrow morning.
If they disappoint however, the Pound’s recovery is likely to be limited throughout the rest of the week.
Still, GBP EUR could also advance if key German inflation stats disappoint later in the week.
[Previously updated 12:35 BST 25/07/2017]
Despite briefly recovering to near the key 1.12 level on Monday, the Pound Euro exchange rate slipped again slightly this morning.
Investors reacted to a better-than-expected German business confidence survey from Ifo, which kept GBP EUR pressured in the region of 1.11.
Ifo’s German business climate print from July was forecast to slip to 114.9, but instead advanced from a revised 115.2 to 116. Current conditions improved from 124.2 to 125.4 and expectations rose from 106.8 to 107.3. All three prints were forecast to drop but instead advanced, which boosted Euro demand.
However, ahead of more influential data due at the end of the week, the Euro’s upside potential is limited.
[Published 06:00 BST 25/07/2017]
Investors had the opportunity to buy the Pound Euro exchange rate up from its cheapest levels on Monday, as the latest Eurozone PMIs fell short of expectations. However, unless Eurozone data continues to disappoint the shared currency is still appealing to investors.
GBP EUR plunged last week, opening at 1.1420 and ending the week near the level of 1.1141. The pair recovered to just below the level of 1.12 on Monday, but remains less than a cent away from last week’s low of 1.1121 – the lowest GBP EUR level since November 2016.
Pound (GBP) Recovery Limited by IMF’s UK Growth Forecast
The Pound mounted a limited recovery against the Euro yesterday. As the day’s Eurozone data disappointed, markets took the opportunity to buy the embattled Pound up slightly from its cheapest levels.
This was despite a lack of any supportive factors in Pound trade and lasting concerns about last week’s underwhelming ecostats and Brexit concerns.
Its recovery was limited further by the latest UK growth outlook from the International Monetary Fund (IMF), which cut its 2017 forecast from 2% to 1.7%.
Markus Kuger from Dun & Bradstreet argued that UK businesses should pay attention to IMF’s forecast;
‘The IMF’s downgrade reflects the undercurrent of political and economic uncertainty in the UK, as the impact of Brexit on the economy remains unclear. The first quarter of the year saw a mediocre economic performance and Dun & Bradstreet rates the level of risk in the UK as ‘deteriorating’.
The slow progress of Brexit negotiations is creating considerable unpredictability for businesses operating in and with the UK. This has only been intensified by the results of the general election in June, as the government’s narrow parliamentary majority is further complicating the process of leaving the EU.’
As Kuger mentioned, Brexit negotiations are causing uncertainty – not just among businesses but among traders too. The past week saw UK Trade Minister Liam Fox entertain the possibility of the Brexit process ending with no UK-EU trade deal, which spooked markets.
Last week also saw UK inflation stats fall short, dampening speculation that the Bank of England (BoE) could tighten monetary policy within the foreseeable future. Public sector borrowing data concerned analysts too.
Euro (EUR) Sold from Highs as Eurozone PMIs Disappoint
The Euro was unable to hold its highs against the Pound on Monday as investors reacted to Markit’s July PMI projections for the Eurozone, which were largely disappointing.
While France’s manufacturing PMI actually beat expectations and rose to 55.4 rather than dropping, France’s other prints fell short.
Germany’s PMIs failed to meet expectations in every print, with Germany’s key manufacturing PMI falling from 59.6 to 58.3.
As a result of the slower-than-expected results throughout the bloc, the Eurozone’s overall PMIs also fell short in every print. The Eurozone’s composite PMI slipped from 56.3 to 55.8.
Still, while the data failed to meet market expectations the figures were still high and analysts were unsurprised that things slowed after a strong Q2. According to Markit’s chief business economist, Chris Williamson;
‘The July fall in the PMI indicates that the Eurozone’s recent growth spurt lost momentum for a second successive month, but still remained impressive.
The survey data are historically consistent with GDP rising at a quarterly rate of 0.6%, cooling slightly from a pace of over 0.7% signalled for the second quarter.’
However, Williamson also mentioned that the data indicated the European Central Bank (ECB) was likely to be in no hurry to withdraw its quantitative easing (QE) measures, which may have concerned some Euro traders.
Pound Euro Forecast: Ifo Business Confidence Data Ahead
The Pound Euro exchange rate is unlikely to see much shift in direction on Tuesday, though the Pound’s recovery could be limited further if the day’s Eurozone data impresses traders.
The most notable publication of the day will be Ifo’s German business confidence survey from July. Analysts expect the figures to have dropped slightly since June.
If they beat expectations, the Pound Euro exchange rate could slip slightly or at least have its recovery slowed, as the Euro sturdies.
However, if they fall short GBP EUR could continue to gradually recover as Wednesday’s session approaches.
Wednesday will see the publication of Britain’s Q2 Gross Domestic Product (GDP) growth projections.
If they beat expectations it could give the Pound Euro exchange rate the support it needs to spend most of the week recovering from its recent lows.