- Pound Sterling Euro Exchange Rate at 1.16 – Fails to hold recovery to 1.17
- Euro Weaker on ECB News – As well as mixed Eurozone data this week
- UK Trade Data Poor –Solid German data pushes GBP EUR lower
- Forecast: UK Inflation Could Impress – Sterling could gain if it beats expectations
Pound Sterling Euro Exchange Rate Slumps on Friday
Friday’s European session saw the Pound Sterling Euro exchange rate give up its advances to 1.17 and trend in the region of 1.16 for most of the day. GBP EUR was on track to lose around a cent throughout the week overall.
The Euro was slightly supported on Friday by the day’s solid German data, which offset some of the weakness caused by ECB comments on Thursday.
Germany’s industrial production report from February came in with a solid result of 2.2%, despite being expected to contract at -0.1%. Germany’s February trade surplus figure also beat expectations.
Next Tuesday will see the publication of Britain’s March Consumer Price Index (CPI) report. ZEW will also publish its latest economic sentiment surveys for the Eurozone and Germany on Tuesday.
[Previously updated 12:51 BST 07/04/2017]
Despite a big drop in European Central Bank (ECB) tightening bets this week, the Pound Sterling Euro exchange rate slipped from the level of 1.17 down to 1.16 once again on Friday morning due to the day’s underwhelming UK ecostats.
Britain’s latest set of data included news that the nation’s trade deficit had worsened in February rather than lightening. Construction output slowed much further than expected. Industrial and manufacturing production figures also saw unexpected month-on-month contractions.
Manufacturing production was estimated to improve from -1% to around 0.3% month-on-month in February’s print, but the figure instead came in at -0.1%. The monthly industrial production repoert worsened from -0.3% to -0.7% and missed the projected improvement to 0.3%.
[Published 06:00 BST 07/04/2017]
The Pound Sterling Euro exchange rate shed some of its Wednesday gains during Thursday’s European session. Investors became anxious about Britain’s economic outlook once again due to analyst warnings about inflation.
GBP EUR began the week trending at the level of 1.17 and fell to 1.16 amid poor UK data. While the pair briefly recovered to 1.17 on Wednesday and Thursday morning, it spent most of Thursday’s session trending at 1.16 again.
Pound (GBP) Sheds Gains on Analyst Warnings of Slowing UK Growth
Sterling has indeed benefitted from Wednesday’s UK services PMI from Markit, which showed that Britain’s services sector improved more than expected in March. The figure was predicted to rise from 53.3 to 53.5 but instead came in at 55.
However, the result was not enough to completely disperse market concerns about Britain’s economic outlook.
Manufacturing and construction data published earlier in the week indicated unexpected slowing in those sectors in March.
This, as well as analyst concerns about rising prices in Britain affecting consumer spending habits, have weighed on Sterling and prevented GBP EUR from recovering from all of this week’s losses.
As UK inflation continues to rise due to the low value of the Pound, analysts predict consumers will eventually be put off spending as much. This would cause a notable slowdown in many consumer-facing businesses in the services sector.
While this week’s services data beat expectations, many analysts agree this slowdown is still likely in the coming months which has limited Sterling’s strength this week.
Euro (EUR) Weakens on European Central Bank (ECB) Disappointment
Comments from ECB officials on Thursday indicated that there won’t be any action from the European Central Bank (ECB) for some time now.
This week’s mixed Eurozone stats now include retail PMI for March, which came in with a contractive figure of 49.5.
Speeches from ECB officials on Thursday also disappointed traders and weakened demand for the Euro. This allowed the Pound to avoid further losses.
ECB President Mario Draghi delivered a speech on Thursday morning, where he indicated that highly loose and accommodative Eurozone monetary policy was likely to remain in place for some time.
Speculation has risen in recent weeks that rising inflation and solid Eurozone economic performance could pressure the ECB into tightening monetary policy before its quantitative easing (QE) program ends. However, Draghi indicated that interest rates would not move before QE is concluded.
Draghi also defended the bank’s long-term policy easing. He stated;
‘We are confident that our policy is working and that the outlook for the economy is gradually improving. As a result, the forces that are currently weighing on domestic price pressures should continue to wane.
But even so, we have not yet seen sufficient evidence to materially alter our assessment of the inflation outlook – which remains conditional on a very substantial degree of monetary accommodation. Hence a reassessment of the current monetary policy stance is not warranted at this stage.’
Draghi’s position was echoed later on Thursday by ECB board member Peter Praet and ECB Vice President Vítor Constâncio.
Pound Sterling Euro Exchange Rate Forecast: Trade Balance Stats Ahead
Friday’s European session will see the publication of February trade data from Germany and Britain. While these reports are unlikely to cause a significant shift in Pound Sterling Euro exchange rate movement, surprising results could definitely influence the pair.
Germany’s February trade balance could weaken the Euro if it comes in well below expectations. Germany’s industrial production figures could also influence the shared currency.
Britain’s data could prove a little more influential in comparison. Industrial production, manufacturing production, construction output and trade deficit data from February will be published.
Also notable is a speech from Bank of England (BoE) Governor Mark Carney, due to take place in the morning.
If Carney talks monetary policy and indicates that the bank will continue to overlook rising inflation, any attempts at GBP EUR recovery on Friday will be limited.
Even after Wednesday’s strong UK services results, GBP EUR failed to recover all of this week’s losses. As a result, it’s highly unlikely the Pound Sterling Euro exchange rate will find the support it needs to recover a cent in value on Friday.