- UPDATE: Eurozone GDP and unemployment reports impress
- UPDATE: German retail sales slump intensifies in March
- UPDATE: German inflation slows in April
- UPDATE: Pound (GBP) Strong despite slowing housing price growth; Spanish unemployment rises
Robust Eurozone GDP Sends GBP/EUR Down from Best Rate
After achieving a high of 1.29 earlier in the week, the Pound Sterling to Euro exchange rate weakened to 1.27 before the weekend as investors responded to fairly upbeat growth data for the Eurozone.
While inflation in the region remains a cause for concern, quarterly and annual expansion exceeded forecasts and gave the Euro a boost during Friday’s European session.
Unemployment in the currency bloc also fell from 10.4% to 10.2%.
Euro Softens on Poor German Sales Figures
Retail sales in Germany fell significantly during March, according to the latest data. On the month, the decline in sales volume accelerated from -0.4% to -1.1%, defying forecasts of 0.4% growth. After a surge of 5.5% year-on-year in February, annual sales growth slowed to 0.7%, falling short of expectations by -1.3%. As a result, the Euro has slipped into negative territory against the Pound ahead of today’s key Eurozone CPI data.
GBP/EUR Holding Opening Levels after German CPI Disappointment
The latest German consumer price data has revealed a slowdown in inflation, creating downside risks for the next Eurozone reading. Causing expectations of additional monetary stimulus from the European Central Bank (ECB) to weigh heavily on the Euro. Prices fell -0.2% on the month after 0.8% growth previously, while on the year inflation slowed to 0.1% from 0.3% in March. Both readings were as forecast, but the harmonised figures have performed below expectations, showing -0.3% growth on the month and -0.1% on the year, ten basis points worse-than-predicted in both instances.
Pound Remains in Positive Territory after Spanish Unemployment Rises
Although the only UK data due out during the European session has disappointed, GBP/EUR remains in positive territory. The Nationwide Housing Prices index slowed from 5.7% to 4.9%, marginally undercutting the forecasts, while prices increased just 0.2% on the month.
However, the Pound was saved from depreciation by the latest unemployment figures from Spain, which show that joblessness crept up to 21% in the first quarter of 2016, defying forecasts of remaining level at 20.9%.
Yesterday saw the Pound Sterling to Euro (GBP/EUR) exchange rate’s recovery come to an end as buoyant sentiment strengthened the common currency. Rising German confidence softened fears that the latest European Central Bank (ECB) stimulus measures still weren’t enough to increase inflationary pressures.
UK GDP Slows in 2016 Q1; GBP/EUR Exchange Rate Slumps
Although the Pound started yesterday’s London session on the rise, the UK unit had extended losses of -0.4% by the end of trading. The preliminary figures for first quarter UK GDP surprised on an annual basis, remaining at 2.1% instead of dipping ten basis points. However, investors were more interested in the quarterly figures, which revealed the predicted slowdown in growth from 0.6% to 0.4%.
While many have said the slowdown can be linked to ‘Brexit’ concerns – as the Bank of England (BoE) suggested in its latest monetary policy report – the Centre for Economics and Business Research’s Scott Corfe claimed there was more behind the data.
‘The consumer economy is coming off the boil,’ he stated. ‘Retail sales volumes have fallen for two consecutive months on the latest ONS data. Rising inflation later this year and into 2017 will take further steam out of the household-led recovery, as will signs of a softening in the labour market with some high profile companies announcing job cuts in recent weeks.’
In other news, the Organisation for Economic Co-operation and Development (OECD) stated that a ‘Brexit’ could cost the average UK household the equivalent of a month’s salary (£2,200) by the end of 2019. OECD Secretary General (OECD) Angel Gurría claimed that ‘there is no upside for the UK in Brexit.’
Euro (EUR) Advances on Rising German Confidence despite Greek Debt Complications
The Greek debt crisis caused some turbulence in the markets yesterday. Creditors had been close to reaching an accord, but things took a step backwards after Greece called for an EU summit to discuss its bailout. Discussions continue to stall as the two sides – Eurozone creditors and the International Monetary Fund (IMF) – contest the conditions of the latest Greek bailout. Greece once again accused the IMF of deliberately undermining negotiations in an attempt to force the country into defaulting on its upcoming debt payments.
However, the uncertainty failed to soften the Euro yesterday after the GfK Consumer Confidence Survey showed a surprise uptick in sentiment, increasing from 9.4 to 9.7. Of particular interest was another increase in propensity to buy, as consumers became even more inclined to make purchases. This suggested that the European Central Bank’s (ECB) stimulus measures were working, indicating that future inflation data could show a rise in consumer prices.
According to GfK, ‘Consumers are clearly assuming that the German economy will regain some momentum in the coming months. Economic expectation rose accordingly in April. Income expectation and propensity to buy have both made noticeable gains, once again improving their already very good level.’
Pound Sterling to Euro Forecast: German Unemployment and CPI in Focus
With no UK data due out tomorrow until the very end of the day, GBP/EUR movement will come mostly from the tier-one Eurozone releases. German Unemployment is expected to remain level, while the consumer price index is anticipated to show a slowdown in inflation, falling from 0.3% to 0.1%. These results could help Pound Sterling to regain ground.
Also of significance today will be the US GDP and personal consumption figures, both of which are expected to have slowed considerably on their previous results. Should these weaken the US Dollar, the Euro may be able to shake off some of the negative effects of poor domestic data thanks to the negative EUR/USD correlation. If both sets of data do print poorly, Pound Sterling could receive a boost thanks to limited demand for either safe-haven asset.
The Pound Sterling to Euro (GBP/EUR) exchange rate trended between 1.2835 and 1.2922 during yesterday’s European session, while the Euro to Pound Sterling (EUR/GBP) exchange rate trended between 0.7736 and 0.7785.