- Pound Sterling Euro Exchange Rate Holds Above 1.17 on Thursday – Near 2017 highs
- German Trade Data Fails to Support Euro – Grexit concerns persist across Eurozone
- UK Trade Data Impresses Today – Sterling fails to capitalise
- EUR Forecast: Eurozone GDP Next Week – As well as January’s German CPI results
Pound Sterling Euro Exchange Rate Edges Up on UK Growth Estimate
After fluctuating for most of the day, the Pound Sterling Euro exchange rate edged higher towards the end of the week’s European session due to an impressive UK Gross Domestic Product (GDP) estimate from NIESR.
NIESR’s GDP projection for the three months into January came in at 0.7% while November’s result was revised higher from 0.5% to 0.6%. With UK growth continuing to beat expectations, investor hopes are increasing that Britain’s economy will be able to successfully weather the Brexit process.
While demand for the Euro improved due to lighter Grexit concerns, the Euro remained jittery as investors did not expect a solution to be revealed in the coming day or so.
As a result of this and the day’s impressive UK data, Sterling held its ground against the Euro for most of Friday and ended the week well above opening levels.
[Previously updated 12:49 GMT 10/02/2017]
Despite strong UK data being published on Friday, the Pound Sterling Euro exchange rate remained flat near the level of 1.17 throughout the morning.
This was largely due to a stronger Euro. Demand for the shared currency improved on Friday as this week’s Grexit jitters eased.
Economists and traders became increasingly confident towards the end of the week that Greece would smoothly be granted new debt relief measures by EU lenders in the near future, despite a perceived disagreement earlier in the week between the International Monetary Fund (IMF) and Eurozone lenders on how to proceed.
If Greece’s debt crisis continues to be handled with minimal obstacles, Grexit fears will subside and the Euro will strengthen.
[Published 06:00 GMT 10/02/2017]
The Pound Sterling Euro exchange rate advanced on Thursday as demand for the Euro faded on disappointing German trade stats and renewed Grexit concerns. The pair looks to end the week higher.
GBP EUR trended in the region of 1.17 for most of Thursday’s European session. The pair has gained almost two cents in value since opening the week at 1.15.
Pound (GBP) Advances on Weak Rivals and Lasting BoE Hopes
Sterling has remained strong this week since Bank of England (BoE) policymaker Kristin Forbes released hawkish comments on UK monetary policy earlier in the week.
In statements from her Wednesday speech in Leeds, Forbes commented that if Britain’s economy remained solid and inflation continued to rise, she would be willing to support an interest hike in the foreseeable future.
Analysts pointed out that Forbes is typically hawkish and that the comments should not move markets considerably. However, Sterling benefitted from the comments throughout the week due to weakness in the Euro.
On Thursday, the third day of the Pound’s run, the currency was given additional support by January’s strong house price balance report from RICS – which came in at 25%.
Then later in the day, Sterling traders were given yet more reason to be cheery as the successor to BoE Deputy Governor Minouche Shafik was finally confirmed by UK Chancellor Philip Hammond.
Hammond picked Charlotte Hogg as the new deputy. Hogg has a history at US bank Morgan Stanley as well as UK bank Santander and will become the newest member of the BoE’s nine-person Monetary Policy Committee (MPC) when she succeeds outgoing deputy Shafik.
However, the news came alongside confirmation that the hawkish Forbes would be stepping down from the MPC in June. As a result, Sterling’s gains were limited in the afternoon amid the prospect of one less hawk on the BoE team.
Euro (EUR) Fails to Benefit from Germany’s Record Trade Surplus
The Euro, on the other hand, remained limp on Thursday allowing the Pound to easily advance. The day’s most notable Eurozone data was Germany’s December 2016 trade report.
Unfortunately, most of the report’s figures were disappointing. The trade surplus dropped further than predicted, from €22.7b to €18.7b, while the current account slipped from €24.6b to €24b.
Euro traders were also disappointed when Germany’s December exports result contracted -3.3%.
As a result of the print failing to meet investor expectations, the Euro failed to benefit despite it being confirmed that 2016’s German trade surplus came in at €252.9b overall – the highest surplus ever recorded.
Other ongoing concerns, such as the Eurozone’s upcoming 2017 political elections, as well as fears that Greece may be pressured to pull out of the Eurozone (or Grexit) have kept the Euro in low demand.
Germany’s finance minister, Wolfgang Schäuble. Schäuble stated that the Eurozone must leave the Eurozone if it wants its debts to be cut.
Pound Sterling Euro Exchange Rate Forecast: UK Trade Data Due Today
If Friday’s UK trade data is able to beat market expectations, the Pound Sterling Euro exchange rate is highly likely to end the week above opening levels.
Investors expect Britain’s trade deficit to have lightened slightly in December, from -£4.17b to -£3.5b. If it lightens further than expected, the Pound will likely remain strong until the end of the week.
However, if the trade deficit worsens, investors will become increasingly concerned that the UK economy will struggle significantly once the Pound’s value hits consumer prices and potentially dampens UK growth.
Friday’s other UK data includes December’s manufacturing production, industrial production and construction output results. NIESR will also publish its January Gross Domestic Product (GDP) estimate.
Euro trade is likely to be comparatively quiet until the end of the week as most of the Eurozone’s most influential reports have already come in.
Instead, Eurozone traders will turn their attention to next week’s much busier economic calendar. Eurozone data due next week includes key Q4 GDP figures for Germany, Italy and the Eurozone as a whole.
Next week will also see the publication of Britain’s January Consumer Price Index (CPI) results which will give investors a much better idea of how the Pound’s value is affecting consumer prices this year.
As a result, movement in the Pound Sterling Euro exchange rate is likely to be much busier next week.