- German Unemployment Positive – Joblessness falls in April
- German Confidence High – Indicates healthy German buying habits
- Poor UK House Price Data – Follows Wednesday’s slowed GDP
- Eurozone GDP Firm – Euro gains on rivals
EUR/GBP Advances on Promising GDP Scores
The Euro to Pound Sterling exchange rate looks to be ending the week on a new weekly high of around 0.7828, with the pair up around 0.7% on Friday.
The reasons for this sudden shift include poor UK house price and consumer confidence data.
But the primary reason for the Euro’s sudden bullishness is the latest Gross Domestic Product (GDP) release for the Eurozone, which saw quarterly growth of 0.6% and yearly expansion of 1.6%, beating out 0.4% and 1.4% estimates respectively.
Unemployment within the Eurozone also bolstered the shared currency, with February’s disappointing 10.4% unemployment rate improving to 10.2%.
The bullish Euro comes in defiance of the latest German and Eurozone Consumer Price Index (CPI) releases, which showed slowing inflation across the board and could result in further European Central Bank (ECB) stimulus.
The Euro to Pound Sterling (EUR/GBP) exchange rate has fluctuated since Wednesday as the Euro regains strength and the Pound’s earlier rally starts to slow, with today’s economic calendar promising a large showing for the Eurozone, the Euro’s fortunes may turn around.
EUR/GBP currently trends narrowly in the region of 0.7787. The pair has experienced small fluctuations this week, hitting a low of 0.7741 and a high of 0.7796 since Wednesday’s session.
Euro (EUR) Holds Ground on Solid Data
The Euro had recently been uninspired, allowing the Pound to make considerable advances against it as the EUR/GBP pair hit a seven-week-low.
However the Eurozone’s quiet data calendar finally sprung to life on Wednesday when GfK’s German consumer confidence report came in with a healthy score of 9.7.
Unexpectedly rising from April’s 9.4, the report indicated that German consumers were still comfortable with buying conditions despite worries that European Central Bank (ECB) policies were hurting the German economy.
Markets on Thursday focused their attention on Germany’s highly anticipated data, with unemployment released in the morning and preliminary Consumer Price Index (CPI) figures due later.
German unemployment fell by -2k in March, and was forecast to stagnate in April with a change of 0k, however the April report instead showed a solid unemployment change of -16k. While the key unemployment rate remained at 6.2% as forecast, the score highlighted a healthy job pool in Germany and this strengthened Euro sentiment.
Pound (GBP) Down from 5-Week Best, Weighed on by Poor House Prices
The Pound’s bullish run seems to have drawn to an end this week as investors settle on previous news that a ‘Brexit’ is less likely than previously feared and refocus on Britain’s economic releases.
Sterling had enjoyed a huge bout of increased strength last week as bets that the UK would leave the EU in June shifted heavily towards ‘Remain’, allowing investors to expect a safer, more predictable future for the nation’s economy and currency.
As a result, yesterday’s key Gross Domestic Product (GDP) releases calmed the Pound and saw it trading comparatively flatly.
While the year-on-year print impressed analysts by holding steady at 2.1%, the quarterly score slowed from 0.6% to 0.4% in Q1. This was largely as analysts expected, but slowed Sterling’s advance somewhat despite projections for stronger growth later in the year.
The Pound weakened further on Thursday’s Nationwide house price report, which showed a lower-than-expected score of 4.9%. Nationwide Chief Robert Gardner stated;
“It may be that the surge in house purchase activity resulting from the increase in stamp duty on second homes from 1 April provided a temporary boost to prices in March. […] House purchase activity is likely to fall in the months ahead given the number of purchasers that brought forward transactions.”
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast: German CPI Today, Eurozone CPI Tomorrow
With the EUR/GBP exchange rate currently fluctuating, data due for release before the week’s end is likely to inject some direction into the pair.
Early this afternoon, Germany’s preliminary April Consumer Price Index (CPI) is due to be released. A contraction of -0.2% from 0.8% in March is currently expected for its monthly print, with the year-on-year result forecast to slow from 0.3% to 0.1%.
The Euro’s uptrend could falter if these scores do not perform better than expected and the currency could slide if they prove worse.
Friday sees a slew of Eurozone data due for release, with German retail sales earlier in the morning and key Eurozone unemployment and CPI prints due before midday.
Britain, on the other hand, is due to release its April GfK consumer confidence survey on Friday, followed by a March mortgage approvals report later in the day. Consumer confidence is forecast to leave stagnation and contract by -1, a score that would likely hinder Pound gains.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7787, while the Pound Sterling to Euro (GBP/EUR) exchange rate traded at around 1.2840.