GBP/EUR Up Despite Poor UK Data
The Pound edged up by around 0.2% during Wednesday’s session despite employment data coming in negatively, and traded around 1.2692.
While unemployment and claimant counts stayed at 5.1% and 2.1% respectively, the total number of unemployed citizens grew to 1.7mil.
However, this didn’t weigh on the Pound (GBP) considerably as the unemployment rate was still below the 5.6% rate of the same period last year.
European Central Bank (ECB) concerns continued to weigh on the Euro’s (EUR) strength, as investors prepare for tomorrow’s key rate decisions.
Pound (GBP) Rallies on Improved ‘Remain’ Bets
After regaining its losses from Monday’s session Sterling was left unsatisfied and continued its advance over the weakened Euro.
The unexpected GBP bull run comes as a result of a poll published by the Telegraph which excited ‘Brexit’-weary investors. According to the poll, a growing amount of ‘Remain’ supporters have become motivated to go out and vote in the EU Referendum. As a result, bets that Britain would exit the EU lightened and the Pound edged higher.
Tuesday ZEW data was positive for the Eurozone, allowing the Euro to limit the Pound’s gains.
Eurozone’s economic sentiment hiked from 10.6 to an impressive 21.5 in April, but the bullish figure wasn’t enough to inspire investor movement as they prepare for Wednesday’s UK employment data.
The jobs data is forecast to be fairly upbeat, with the unemployment rate remaining unchanged and average earnings increasing.
A disappointing result could see the Pound give up some of its recent gains.
- Pound Left Uninspired – Lack of data, bearish economists leave Sterling floundering
- Investors Wary of ECB’s Draghi – Mario Draghi claims rates to stay low for at least a year
- Forecast: ZEW Surveys Could Strengthen Euro – German and Eurozone economies in focus
- Forecast: ECB Decisions on Thursday – Will any announcements surprise investors?
The Pound Sterling to Euro (GBP/EUR) exchange rate ended last week flat and thus far has experienced little movement as both currencies remain weakened by economic issues and ‘Brexit’ concerns.
After briefly dipping to 1.2517 during Monday’s session, GBP/EUR regained its losses as the day continued, ultimately trading close to the week’s opening levels of 1.2590. Before the close of the European session, the pair had appreciated to around 1.2598. Whether or not the Pound is able to hold it’s own against the Euro this week will largely depend on the outcome of this week’s UK employment report. An uptick in average earnings would be Pound-positive.
Sterling (GBP) Droops on Chancellor Osborne’s Warnings, Treasury Report
The Pound was rattled by a series of factors during Monday’s session as investors reacted all at once to events that had happened since Friday and throughout the weekend.
Most vitally for Britain had been Chancellor of the Exchequer George Osborne’s extended series of statements about how a post-‘Brexit’ Britain may unfold, some of which he made during the IMF’s 2016 Spring Meetings and others he made after returning on Monday.
Osborne’s Treasury also released an official report on the potential national repercussions of a ‘Brexit’.
In it, he claimed that Britain would be economically worse off for ‘decades to come’ as permanent side-effects to losing EU membership would include shedding millions of Pounds in the healthcare and education sectors, as reported by the Telegraph.
This barrage follows his 2016 Spring Meetings statements, in which he claimed that mortgage prices would likely soar and we’d see a sudden, dangerous spike in domestic inflation in the event that the UK leaves the EU. This could be followed by the Bank of England (BoE) hiking rates.
European Central Bank (ECB) Remains in Spotlight after Draghi’s Latest Comments
The Euro (EUR) has continued to feel the weight of ECB decision making since March’s shocking easing measures were announced. Pressure remains on the shared currency after ECB President Mario Draghi spoke in Washington, Bloomberg reports;
Draghi reiterated in Washington last week that it is “crucial” the very low inflation environment does not become entrenched in second-round effects on wage and price-setting. The inflation rate was zero last month, and economists see it climbing only slowly to average 1.7 percent in 2018.
His concerns appear to be weighing on economists’ optimism. In the survey before the ECB’s March 10 meeting, most respondents said the rate cuts and QE boost they expected then, and which Draghi delivered, would be enough to get the job done.
Draghi also reminded markets that rates would not be hiked again until March 2017 at the earliest, and may even be cut before that time.
However, faith in Draghi’s methods and the ECB was restored slightly after reports suggested that the often-mentioned concept of ‘helicopter money’ (giving money directly to consumers) was discarded by a majority of policymakers and analysts.
Most economists claimed that the concept would not even be considered until a wealth of other still unused easing measures had been tried first.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Could Fall if Eurozone Sentiment Strengthens
The main data in focus today is certain to be the Centre for European Economic Research (ZEW) Survey. The monthly report is a highly anticipated indication of economic sentiment focused on Germany and the Eurozone as a whole.
German sentiment is currently expected to have risen from 4.3 to 8.0 in April.
Due for release in just a few hours, printing considerably above or below March’s figure is highly likely to influence the Euro (EUR) ahead of Thursday’s European Central Bank (ECB) rate decision announcement.
Pound (GBP) investors, on the other hand, are likely to continue focusing on Chancellor Osborne’s warnings and pay attention to any particularly strong arguments made by the official ‘Leave’ and ‘Remain’ campaigns for the EU referendum.
British data in the form of employment reports will be released tomorrow, but until then Sterling will merely float on political news and be dictated by the direction of its rivals.