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UK Data Dampens 2017 British Pound Euro Outlook in First Week of April

  • 2017 British Pound Euro Exchange Rate Near 1.16 – Poor UK data keeps it from highs
  • UK Services PMI Beats Expectations – Concerns of worsening UK economy lighten
  • UK Data Disappoints – German stats beat expectations
  • Forecast: UK Inflation Figures Next Week – Could alter BoE tightening bets

2017 British Pound Euro Exchange Rate Returns to 1.16 on Friday

After a heavily mixed week, the 2017 British Pound Euro exchange rate looks to end the week’s European session much closer to its weekly lows than the week’s opening level.

At the time of writing on Friday afternoon, GBP EUR trended in the region of 1.16 and had lost around a cent since the beginning of the week.

While Thursday’s European Central Bank (ECB) news continued to limit the Euro’s gains, the shared currency was bolstered by solid German data on Friday that made it easier to gain against the weak Pound.

Germany’s Friday trade surplus came in well above expectations, and February’s monthly industrial production print was able to avoid a projected contraction of -0.1% and come in at 2.2% instead.

Next week’s focus is likely to be Britain’s March Consumer Price Index (CPI) results. If inflation beats expectations the Pound could gain as investors increase bets of Bank of England (BoE) tightening.

[Previously updated 12:46 BST 07/04/2017]

After testing the level of 1.17 on multiple occasions throughout Wednesday and Thursday, the 2017 British Pound Euro exchange rate slipped back down to 1.16 on Friday morning following the publication of some disappointing British data.

Britain’s February trade deficit worsened further than expected, from -£2.98b to -£3.66b. Investors were hoping the deficit would lighten to around -£2.2b.

Economic activity stats from Britain also disappointed. Construction output slowed to 0.5% year-on-year despite being projected to only slide from 2.3% to 1.9%.

Manufacturing and industrial production results were even worse. Both prints saw monthly contractions, disappointing traders hoping for the sectors to see growth in February.

[Previously updated 16:40 BST 06/04/2017]

2017 British Pound Euro Mixed on Thursday

Demand for the Pound weakened on Thursday, but weakness in the Euro allowed the 2017 British Pound Euro exchange rate to recover to the level of 1.17 at various points throughout the day.

Investors continued to digest the day’s comments from European Central Bank (ECB) officials and bets that the ECB could begin to tighten monetary policy in the mid-term future plunged.

The Euro was also held back slightly by news that pro-EU centrist French election candidate, Emmanuel Macron, had seen his lead shrink in the latest opinion polls.

GBP EUR is likely to end the week below opening levels, but GBP EUR could continue to recover on Friday if UK data improves and German data disappoints.

[Previously updated 12:49 BST 06/04/2017]

After briefly reaching the level of 1.17 at multiple points on Wednesday afternoon and Thursday morning, GBP EUR fell back into the region of 1.16 as the Pound failed to find the momentum to keep advancing.

GBP EUR surged by almost half a cent on Thursday morning but quickly slipped back down again as the Pound rally faded.

While markets were indeed impressed with Wednesday’s UK services data, analyst remained concerned that the services sector could still worsen in the coming months if inflation has a negative effect on consumer spending. As a result, the 2017 British Pound Euro outlook was not improved significantly by Wednesday’s report.

As a result of investors giving up on the Pound rally, the Euro was able to benefit despite the day’s Eurozone news. This included disappointing Eurozone retail PMI for March, as well as a dovish tone from European Central Bank (ECB) officials including President Mario Draghi.

[Published 06:00 BST 06/04/2017]

The 2017 British Pound Euro exchange rate spiked upwards on Wednesday and recovered from its weekly lows as Britain’s UK services data beat expectations.

GBP EUR began this week trading at the level of 1.17. The pair trended lower throughout Monday and Tuesday and fell into the region of 1.16. For most of Wednesday’s European session GBP EUR faced psychological resistance but trended near 1.17 once more.

Pound (GBP) Benefits from Strong Services Report

Due to poor UK manufacturing and construction data published earlier in the week, the Pound tumbled on Monday and Tuesday as investors grew concerned that Britain’s economic activity was beginning to slow on Brexit concerns and rising inflation.

However, when Wednesday morning’s UK services data from March was published the Pound shot up as those concerns lightened.

The PMI was projected to only improve slightly from 53.3 to 53.5, but the final result of 55 was highly impressive, especially to investors concerned about a possible slowing in the services sector.

Economists generally found the figures to be encouraging, but Markit noted that the services sector created fewer new jobs in March than in February.

The 2017 British Pound Euro exchange rate was unable to reverse all of this week’s losses as some analysts continued to express concerns about how the economy could shift in the coming months. According to Howard Archer from IHS Global Insight;

‘Services activity has been particularly led by the consumer-facing sectors. Looking ahead, we suspect that consumer services activity will be increasingly pressurized by consumers’ purchasing power weakening over the coming months as inflation rises appreciably and earnings growth is muted.

This is likely to cause some consumers to cut back on their discretionary spending, including on services.’

Archer’s own analysis reflects what many analysts have suggested in recent months, that inflation still has strong potential to put a dent in consumer activity throughout the year despite this week’s data.

Euro (EUR) Support Thins as Eurozone PMIs Print Below Expectations

Wednesday’s Eurozone services PMIs came in below expectations compared to Britain’s impressive services report, which made it easier for GBP EUR to advance.

Analysts had expected Eurozone services to improve from 55.5 to 56.5 in the March print, but they only rose to 56 and missed Markit’s preliminary projections published two weeks ago.

The bloc’s composite PMI was a similar story, being projected to improve from 56 to 56.6 but only making it to 56.4.

Despite the worse-than-expected Eurozone PMIs, investors remained generally optimistic on the currency bloc. This report rounded off the bloc’s best quarter for private sector activity since the beginning of the financial crisis.

According to Markit chief economist Chris Williamson;

‘This is a broad-based upturn among the Euro’s largest members, with 0.6% growth signalled for both Germany and France, while Spain looks set to have enjoyed 0.8-0.9% growth in the first quarter, according to the PMI data.’

2017 British Pound Euro Forecast: Trade Data Due Friday

Thursday’s session may be relatively calm for this week’s GBP EUR movement amid a lack of influential new ecostats from Britain or the Eurozone.

While European Central Bank (ECB) President Mario Draghi will be speaking in Frankfurt on Thursday morning, he is unlikely to focus on monetary policy.

Regardless, any hints from Draghi about monetary policy or Eurozone inflation could cause shifts in the Euro’s direction towards the end of the week.

Markit’s Eurozone retail PMI from March will also be published, but these are unlikely to be highly influential either.

With the UK economic outlook slightly improved following Wednesday’s services stats, the Pound could continue to gradually recover in otherwise quiet Thursday trade – but its gains could be limited by concerns that the economy could still slow in the coming months.

Friday will be comparatively busy. Germany’s February trade report will be published alongside German industrial production figures from February.

This will be followed by a set of UK February data. This includes Britain’s latest trade deficit update, as well as industrial and manufacturing production results.

Friday will also see Bank of England (BoE) Governor Mark Carney make a speech in London. Like with Draghi, any comments from Carney on inflation or Britain’s monetary policy outlook could influence Sterling demand but are unlikely.

Overall however, most of this week’s key UK and Eurozone ecostats have already been published and the 2017 British Pound Euro exchange rate is unlikely to make any huge shifts in direction before the end of the week.