Euro to Pound Exchange Rate Rising on Hopes for Eurozone Economic Recovery
After sliding at the beginning of the week when the Pound enjoyed a brief rebound from its latest losses, the Euro to Pound Sterling (EUR/GBP) exchange rate has been climbing again since yesterday. This morning’s gains were even sharper.
Last week saw EUR/GBP climbing from 0.8606 to 0.8645, gaining almost half a pence due to Eurozone economic hopes and Brexit jitters. After a brief dip at the beginning of this week, EUR/GBP has continued its climb.
At the time of writing on Wednesday morning, EUR/GBP is trending near a high of 0.8674. This was the best level for the pair since the 21st of March, almost a month ago.
Thanks to some stronger than expected Eurozone confidence data yesterday, the Euro (EUR) was able to more easily sustain gains versus the Pound, (GBP) which has been weak on Brexit uncertainties.
Euro (EUR) Exchange Rates Climb on Hopes for Eurozone Economic Resilience
Despite a relatively dovish tone from the European Central Bank (ECB) over the past week, investors have still been cautiously betting on a slightly stronger Euro outlook due to fresh signs of resilience in Eurozone data.
Yesterday saw the publication of ZEW’s April economic sentiment indexes for Germany and the Eurozone.
Despite Germany’s current conditions falling short of expectations and indicating that economists are still anxious about current activity levels, the sentiment stats saw an unexpectedly strong rise.
Eurozone economic sentiment rose from -2.5 to 4.5 rather than the expected 1.2. On top of this, Eurozone construction output came in at a much stronger than expected 5.2%.
Hopes for Eurozone economic resilience were further supported by fresh comments from Italy’s Economic Minister Giovanni Tria, who said today that the Italian economy was showing encouraging signs so far this year.
Pound (GBP) Exchange Rates Unappealing on Concerns of Stalling Brexit Talks
At the beginning of the week, demand for the Pound rose as investors bought the British currency back from the selloff it experienced last week.
Hopes that the Brexit process would end up softer briefly rose as investors digested the process seeing a long delay until the 31st of October.
However, hopes for a soft Brexit only gave limited support for Sterling this week. Sterling slipped again as concerns quickly returned that the UK government may be less willing to compromise in talks than hoped.
On Tuesday, a report emerged suggesting that opposition Leader Jeremy Corbyn had said negotiations with the government were stalling.
While the report’s validity has been denied by other members of the Labour Party, the news still weighed on the Pound and made it easier for EUR/GBP to gain.
Euro to Pound (EUR/GBP) Exchange Rate Outlook Depends on Economic Outlooks
Brexit developments – or a lack thereof – are weighing on the Pound this week. With investors doubtful that any major new Brexit developments will happen any time soon, the Euro to Pound (EUR/GBP) exchange rate outlook is more likely to be driven by data instead.
Thursday will see the publication of this week’s most influential Eurozone and UK ecostats.
Markit’s April PMI projections for the Eurozone are likely to be the best indication thus far of how the Eurozone economy is performing this month.
If they beat expectations, the Euro could see stronger demand towards the end of the week as investors would become more optimistic about the Eurozone’s economic resilience.
Britain’s March retail sales results will be published tomorrow too. Pound investors are looking for signs that Britain’s economic activity is resilient amid broad Brexit uncertainty, as the uncertainty is likely to last at least a few more months.
In particular, impressive Eurozone data could douse concerns of European Central Bank (ECB) dovishness and bolster the Euro to Pound (EUR/GBP) exchange rate outlook.