- Pound Sterling Euro Exchange Rate Near 1.17 – Tests weekly highs on Thursday
- Eurozone Inflation Disappoints – Perceived to take tightening pressure off the ECB
- UK Growth Disappoints – Sterling slips from weekly highs
- Forecast: PMIs Publishing Next Week – Could support GBP EUR gains
Pound Sterling Euro Exchange Rate Gains a Cent This Week
Despite struggling to hold its best levels and contending with levels of key psychological resistance throughout Friday, the Pound Sterling to Euro exchange rate had a strong week overall.
GBP EUR looked to end the week comfortably in the region of 1.16, after starting the week at 1.15 and even briefly dipping to 1.14 on Wednesday morning.
The Pound could extend its gains next week if Britain’s March services PMI from Markit impresses traders. Brexit jitters will continue to cool as investors do not expect any major negotiation developments until May or June.
Meanwhile, the Euro could become increasingly jittery as April begins and the date of the 2017 French Presidential election draws closer.
[Previously updated 13:01 BST 31/03/2017]
Friday morning saw the Pound Sterling Euro exchange rate briefly touch on the key level of 1.17 for the first time since the beginning of March, but the pair hit psychological resistance and slipped from these highs towards the middle of the day.
However, GBP EUR still remained well above the week’s opening levels and trended comfortably in the region of 1.16 even after all the day’s key UK and Eurozone data had been published.
Britain’s Q4 2016 Gross Domestic Product (GDP) report was worse year-on-year than expected which prevented the Pound from capitalising on Euro weakness.
The Eurozone’s preliminary March inflation figure came in well below expectations, partially due to the timing of Easter this year. This was perceived as taking pressure off hopes of monetary policy tightening from the European Central Bank (ECB).
[Published 06:00 BST 31/03/2017]
The Pound Sterling to Euro exchange rate advanced on Thursday as Brexit jitters lightened following Wednesday’s activation of Article 50. The Euro weakened due to the day’s underwhelming Eurozone data.
GBP EUR has been fluctuating throughout the week so far. The pair opened at the level of 1.15, hit a low of 1.14 on Wednesday but rebounded to a high of 1.16 on Thursday afternoon. Its Thursday highs were among the best levels seen since the first week of March.
Pound (GBP) Strengthens as Article 50 Uncertainty Passes
Despite a lack of strong supportive data for the Pound this week and the official Brexit process beginning, the Pound performed pretty well for most of Thursday.
Analysts have speculated that with Article 50 now activated, uncertainty over the timing and possible delay of the Brexit process has faded notably. This has given the Pound relief from some of the Brexit pressure it has faced in recent months.
Sterling’s gains haven’t been significant, but the British currency has been sturdy enough for analysts to be a little more optimistic about the Pound outlook, which has cheered markets.
Yann Quelenn, market analyst from Swissquote (a Switzerland bank) stated;
‘Strengthening of the Pound is now very likely especially as Europe faces a veritable minefield with the upcoming French and German elections. Time to reload GBP.’
The tone taken by UK and EU leaders immediately following the activation of Article 50 also made markets optimistic.
European Council leader Donald Tusk indicated he would miss Britain being part of the EU and this friendly gesture increased hopes that UK-EU divorce proceedings would be amicable.
Euro (EUR) Weakens as Data Falls Short
The Euro started out the week quite strongly but by Thursday the shared currency was picking up downward momentum due to political jitters and economic concerns.
As Britain has officially begun its Brexit process, concerns remain high that nations in the Eurozone could also withdraw from the union – especially if nationalist populism rises. For example, analysts still perceive a 2017 French election win for anti-EU Marine Le Pen to be possible.
The latest Eurozone data also disappointed investors on Thursday, which extended the Euro selloff and allowed GBP EUR to easily trend in the region of 1.16.
Thursday saw the publication of Germany’s preliminary March Consumer Price Index (CPI) figures, which came in worse than expected in both monthly and yearly prints.
Monthly inflation slowed from 0.6% to 0.2% despite being expected to only drop to 0.4%. The yearly inflation figure was predicted to slip from 2.2% to 1.9%, but it instead fell to a disappointing 1.6%.
This decreased hopes that the European Central Bank (ECB) could soon be pressured into tightening Eurozone monetary policy.
Most of the drop in inflation can be attributed to Easter taking place in April this year, as opposed to the late-March Easter in 2016 which led to a lot of late-March spending.
However, analysts factored this into their forecasts and the final results were still worse than expected.
Thursday’s Eurozone business confidence stats also disappointed markets.
March business confidence was predicted to improve to 0.9, but instead remained at 0.82. Services sentiment worsened from 13.9 to 12.7 while economic sentiment slipped from 108 to 107.9.
Pound Sterling to Euro Forecast: Big Data Day Ahead
The Pound Sterling to Euro exchange rate looks to be heading higher this week despite the beginning of the Brexit process, but Friday’s UK and Eurozone data has the potential to change this if it diverts from expectations.
Influential ecostats will be published throughout the day, starting with German retail sales for February and Britain’s March house prices results from Nationwide.
This will be followed by Germany’s highly influential March unemployment results, which could give the Euro some late-week support if they beat expectations.
Then Britain’s final Q4 Gross Domestic Product (GDP) will be published. Analysts predict it will meet preliminary figures of 0.7% quarter-on-quarter and 2.0% year-on-year and if it does the Pound is likely to continue on its previous trajectory.
The last influential report of the week will be the Eurozone’s preliminary yearly March inflation stats.
Investors have lower expectations for this following Germany’s disappointing report on Thursday, but if it beats expectations the Euro could improve and the Pound Sterling to Euro exchange rate could shed some of this week’s gains.