GBP/EUR Slide Worsens Throughout Friday
- Poor UK Data Holds Pound (GBP) Down – House prices, GfK consumer confidence disappoint
- Did Obama Help the ‘Remain’ Camp? – New poll suggests US President’s influence was minimal
- Euro (EUR) Up on Unemployment, GDP – Eurozone CPI falls
- Update: Eurozone GDP Gives Euro Sturdy Gains – Pair headed downward
- Forecast: PMIs Next Week – Will Euro Rally Continue?
The Euro made definite advances throughout Friday’s session after being bolstered by the Eurozone’s most recent unemployment and Gross Domestic Product (GDP) figures.
The day’s disappointing inflation figures did little to deter the Euro’s gains against the Pound, despite inevitable worries that the European Central Bank (ECB) could add further stimulus before the end of the year if deflation continues.
While the Pound was up against other currencies, the Euro proved surprisingly strong and undermined its defences. At the time of writing, the pair was down around -0.6% and trended in the region of 1.2784 – below the week’s opening levels of 1.2831.
The Pound Sterling to Euro (GBP/EUR) exchange rate largely fluctuated on Thursday as ‘Brexit’ concerns began to rise again and neither UK nor Eurozone data was able to inspire investors – with even positive German unemployment having minimal impact.
GBP/EUR has hit an 8-week-high of 1.2921 as well as brushing lows of 1.2712 in the last week. At the time of writing, the pair is down around -0.4% and trends within the region of 1.2818.
Sterling (GBP) Rally Falters on Negative Data and ‘Brexit’ Concerns
Despite starting the week with more of the bullish movement seen in the previous two weeks, the Pound lost most of its gains against the Euro (EUR) during Wednesday’s session and has been largely unable to regain them.
This has been due to investors settling on a recent increase in ‘Remain’ bets and refocusing on domestic data; a lot of which has been poor. While British GDP printed largely as expected, the key print indicated that the Bank of England (BoE) is still unlikely to raise rates any time soon even if the UK remains in the EU.
Data released on Thursday and Friday held the Pound down, with Nationwide’s April house price report coming in at 4.9%, lower than the expected 5.0% and a considerable slowing from the previous result of 5.7%.
News released earlier on Friday also failed to restore the Pound’s bullishness, with GfK’s April consumer confidence scoring a low -3 despite projections of only -1, and mortgage approvals increasing by only 71.4k, letting down hopes that they would increase by 74.4k in March.
Lastly, the Pound’s movement may be stuttering again due to a new report that US President Barack Obama’s support of the UK’s ‘Remain’ campaign did little to dissuade ‘Leave’ campaigners.
According to Anthony Wells of YouGov:
‘Some have portrayed Obama’s intervention as backfiring – I wouldn’t go that far but this poll does suggest that Obama hasn’t given the remain team a boost at all.
It hasn’t been a game changer, it hasn’t shifted opinion – it hasn’t really made much difference at all. We have had a neck and neck for months now and nothing seems to be moving that.’
Bets still lean towards the UK remaining in the EU, but this may shift in response to this report.
Key Eurozone Data Impacts GBP/EUR, Euro Gains Slowly
A range of Eurozone data has hit in the last half a week including a slew of German reports as well as fresh Eurozone unemployment and CPI on Friday.
Following last week’s concerns that the European Central Bank (ECB) would introduce more easing measures before 2017, some analysts predicted the Euro had finally caught a break when positive German consumer confidence and unemployment reports helped the Euro hold its ground against a stronger Sterling.
Unfortunately, the preliminary German Consumer Price Index (CPI) released on Thursday afternoon did little to inspire the Euro, printing exactly as analysts forecast with 0.1% in its year-on-year release and -0.2% month-on-month.
The Euro’s chances to recover were damaged further on Friday when German retail sales disappointed expectations of 2.7% with a score of only 0.7%.
This was closely followed by key Eurozone unemployment, CPI and GDP figures. CPI indicated poor inflation, with the updated CPI estimate expecting -0.2%, worse than previous forecasts of -0.1%, and Core CPI slowing from 1.0% to 0.8%, slipping past the projection of 0.9%.
However, the Euro’s defences were bolstered slightly by an optimistic unemployment rate, which improved from February’s disappointing 10.4% to 10.2%. Lastly, Gross Domestic Product (GDP) printed better-than-expected in both yearly and quarterly prints, coming in at 1.6% and 0.6% respectively.
Pound Sterling to Euro Exchange Rate Forecast: GBP/EUR Set to Sink This Week
While GBP/EUR remains close to the week’s opening levels of 1.2831, it currently looks set to end the week’s session in the Euro’s favour, bolstered by the Eurozone’s positive data releases.
With British markets taking a break on Monday as the nation observes the May Day bank holiday, the Euro is likely to take point in GBP/EUR movement before UK markets reopen on Tuesday.
While data next week looks to be initially quiet, early next week sees the results of March’s German retail sales report, followed by the UK’s latest Manufacturing PMI on Tuesday.
The Pound Sterling to Euro (GBP/EUR) exchange rate currently trends in the region of 1.2818, while the Euro to Pound Sterling (EUR/GBP) exchange rate trends around 0.7800.