The Euro has remained in demand against the Pound today, despite an alarming data release from Greece.
Covering GDP growth in Q4, the finalised figures have both dropped to below -1%, putting hopes of 2017 being a turnaround for Greece into serious question.
Responding to the news was Capital Economics Chief European Economist Jennifer McKeown;
‘This will add to the IMF’s scepticism about Greece’s ability to reach its fiscal targets and increases the risk that the bailout will collapse’.
[First Published 10:12 March 6th, 2017]
The Euro managed to gain on the Pound despite the fact that Eurozone news has actually been fairly negative so far today, with the retail PMI for February creeping into the contraction range with a move from 50.1 points to 49.9.
Reacting to the news was IHS Markit Economist Alex Gill;
‘A divergence in retail sector performance across the Euro area persisted in February…that said, retail companies across the Eurozone took on additional staff members, partly indicative of firms’ optimism with regard to their near-term outlook for sales growth’.
Pound losses have come in the lull before Wednesday’s Spring Budget, which is considered crucial due to the looming activation of Article 50.
A lack of UK domestic data has only compounded the issue, with fears about possible budget cuts and an extension of austerity eating into the Pound’s value.
The next major Eurozone news will come on Tuesday – third estimates for the Q4 GDP growth rate.
Predictions have been positive overall, with quarterly growth from 0.3% to 0.4% predicted along with an annual reprint at 1.7%.
Looking further ahead, Thursday will bring the March European Central Bank (ECB) interest rate decision, which is forecast to show no rate change from 0%. Despite this, the Euro could still be supported if ECB officials muse on raising the rate in the future given the recent spike in Eurozone inflation.
Even further ahead, next week will bring the Dutch general election, which may indicate how stable the Eurozone is during its present struggles.
With few direct UK ecostats due today, the next Pound movement is set to come from Wednesday’s Spring Budget, delivered by Chancellor Philip Hammond.
‘Fiscal discipline’ has been Hammond’s watchword since becoming Chancellor in 2016, so the coming budget is not expected to focus on a spending spree so much as targeted investment and cuts.
On the more supportive side, forecasts are for a potential fuel price freeze and £1.3bn fund for social care, but rising taxes for the self-employed and the possibility of no action on rising business rates might negate any positive effects caused by the budget’s brighter points.
Current EUR GBP Interbank Exchange Rates
At the time of writing, the Euro Pound (EUR GBP) exchange rate was trading at 0.86 and the Pound Euro (GBP EUR) exchange rate was trading at 1.15.