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UK Services Data Causes Euro British Pound Fluctuations on Thursday

  • Euro British Pound Exchange Rate Trends at 0.85 – Recovers some of last week’s losses
  • Eurozone Retail Sales Impress – UK construction PMI slows further than expected
  • Eurozone PMIs Rise Less than Expected – UK services stats impress
  • Forecast: Trade Data Due Friday – From Germany and Britain

Euro British Pound Edges Lower on Thursday

The Euro British Pound exchange rate fluctuated on Thursday, but even at its worst levels was still above the week’s opening levels.

Investors continued to sell the Euro throughout the day amid disappointment towards the latest comments from European Central Bank (ECB) officials.

In the afternoon, ECB Vice President Vítor Constâncio echoed the sentiments of Draghi and Praet, indicating the Eurozone was not successful enough for accommodation monetary policy to be withdrawn just yet.

On Friday, investors will react to Germany’s latest trade balance data and industrial production figures from February. Britain’s own trade and industrial production data will be published too, as well as construction output and manufacturing production results.

[Previously updated 12:42 BST 06/04/2017]

Despite Wednesday’s strong UK services stats, the Euro British Pound exchange rate began to edge higher again on Thursday morning as the Pound rally lacked momentum and fizzled out.

Sterling attempted to push EUR GBP down further on Thursday morning, but by the afternoon the pair was advancing again and trended comfortably in the region of 0.85.

Investors largely overlooked the day’s underwhelming Eurozone news.

European Central Bank (ECB) President Mario Draghi, as well as ECB board member Peter Praet, both indicated it was unlikely for the bank to hike Eurozone interest rates before its quantitative easing (QE) program had concluded.

Despite this, the Euro was able to advance against the Pound as traders grew concerned over analyst warnings that Britain’s services sector could still slow due to rising inflation in the coming months.

[Previously updated 16:32 BST 05/04/2017]

Euro British Pound Exchange Rate Slips from Highs on Wednesday

The Euro British Pound exchange rate looked on track to shed most of its Tuesday gains by the end of Wednesday’s European session, as demand for the Pound was bolstered by the day’s UK services stats.

However, due to lasting concerns about Britain’s economic outlook, EUR GBP has remained well above its weekly lows. The pair continues to trend in the region of 0.84.

The Eurozone’s own services and composite PMI prints slightly disappointed investors by not rising as much as Markit had previously projected in March.

However, the figures still saw solid month-on-month improvements and indicated that the Eurozone private sector had seen its best quarterly performance since the beginning of the financial crisis.

Thursday could see EUR GBP continue to slide as Sterling jitters fade slightly, though underlying concerns about UK inflation denting consumer activity could limit the exchange rate from falling much further.

[Previously updated 13:03 BST 05/04/2017]

Following its gradual gains from Monday to Tuesday, the Euro British Pound exchange rate dropped suddenly on Wednesday morning following the publication of Britain’s March services PMI from Markit.

After poor UK manufacturing and construction data earlier in the week, investors had feared UK services would slow and hint at a slowing UK economy.

However, services beat expectations by quite a bit. The print was forecast to improve slightly from 53.3 to 53.5 but jumped to 55 in March, offsetting many concerns that Britain’s biggest private sector was slowing.

Analysts pointed out that employment in the sector was slowing but things looked solid for the UK economy overall. As a result, EUR GBP’s march towards 0.86 was stopped short and the pair continued to trend in the region of 0.85.

[Published 06:00 BST 05/04/2017]

The Euro British Pound exchange rate continued to edge higher on Tuesday as the day’s solid Eurozone stats helped the shared currency to gain against a weakened Pound. Investors are highly anticipating Wednesday’s UK services data.

EUR GBP began the week trending at a one-month low of 0.84 but has since recovered to the level of 0.85. Its gains have been modest and it remains well below last week’s highs.

Euro (EUR) Benefits from Better-Than-Expected Eurozone Retail Sales

The Euro was able to make the most of the Pound’s weakness during Tuesday trade, as the Eurozone’s latest retail sales stats surprised investors with an unexpectedly strong result.

Not only were previous results of -0.1% month-on-month and 1.2% year-on-year revised to 0.1% and 1.5% respectively, the February results also beat expectations.

Analysts expected monthly retail sales to improve to 0.5% but they rose to 0.7%. The yearly result was also impressive, beating the forecast 1.4% and coming in at 1.8%.

The rise in retail sales was largely due to an increase in spending on clothes and other non-food products like textiles, though food was also up 0.3% in February.

Car fuel sales dropped by 0.9%, partially due to inflation which has been largely due to rising energy costs so far.

The increase in retail sales indicated that consumers in the Eurozone still had an appetite for shopping, despite gradually rising inflation throughout the bloc.

Demand for the shared currency has been solid this week, partially thanks to Monday’s solid Eurozone manufacturing and unemployment stats.

Pound (GBP) Demand Slow on Underwhelming PMIs

Investors have become increasingly jittery about how Britain’s services PMI will turn out, as Monday and Tuesday’s manufacturing and construction PMIs for March have now both come in below expectations.

The Pound began to slide on Monday following the publication of Britain’s March manufacturing PMI from Markit and continued to fall when Tuesday’s construction print fell further than expected.

Construction was predicted to slip slightly from 52.5 to 52.4, but instead dropped to 52.2.

Some analysts have taken this week’s PMIs so far to mean that Britain’s economy is indeed slowing down. According to Kathleen Brooks from City Index;

‘Of course, this is early days, and the PMI surveys are impacted by multiple factors, but the decline in the manufacturing and construction PMIs, two sectors impacted by Brexit, suggests that the economic impact of the decision to leave the EU may start to show itself more than nine months after the vote to leave the EU.’

This has led to increased concerns that this week could see a hat-trick of poor UK PMIs. As the Pound continued to drop, investors turn their focuses towards Wednesday’s anticipated services stats.

Euro British Pound Forecast: Services Data in Focus on Wednesday

Wednesday’s European session will be a highly important one for Pound traders but the day’s Eurozone data could also prove influential if it surprises investors.

Analysts and markets widely expect the Eurozone’s final March services and composite prints from Markit will meet the preliminary figures published two weeks ago.

If they surpass expectations, the Euro will pick up momentum and this is likely to leave the Euro British Pound exchange rate stronger by the end of the week.

However, it’s also worth noting that investors will be reacting to the perceived results of the second televised debate of the 2017 French Presidential election campaign.

With the election’s first round under a month away, the Euro is likely to become increasingly jittery, especially if anti-EU candidate Marine Le Pen remains popular. The possibility of Le Pen taking France out of the Eurozone remains a considerable risk to the shared currency.

Even if the Euro performs strongly on Wednesday, EUR GBP could shed its weekly gains if Britain’s March services PMI beats expectations.

Analysts expect Britain’s services stats will increase slightly from 53.3 to 53.5. If services meet or beat expectations, concerns that Britain’s economy is slowing will fade and Sterling could recover some of Monday and Tuesday’s losses. Disappointing results could see EUR GBP continue its advance.

As services make up most of Britain’s Gross Domestic Product (GDP), investors have been waiting for UK services stats before making this week’s biggest Pound movements.

The high influence of Britain’s services figures could influence movement in the Euro British Pound exchange rate until Friday, when UK and German trade balance results for February will be published.