Euro to Pound Exchange Rate Holds Weekly Highs on Strong German Confidence Data
Demand for the Euro to Pound Sterling (EUR/GBP) exchange rate has been solid enough this week allowing it to edge towards its best levels since March. But will there be further gains ahead or will the Pound (GBP) put up more of a fight?
Last week saw EUR/GBP climb from £0.8741 to £0.8788. This week so far, EUR/GBP has edged even higher, and on Thursday morning touched a quarterly high of £0.8836.
If UK data disappoints on Friday, EUR/GBP could be on track to end the week near its best levels.
While the Euro (EUR) has so far been supported by some of this week’s confidence stats, EUR/GBP gains have been limited by resistance levels and market anticipation about Friday’s upcoming UK growth results.
The Euro outlook could also be influenced by Eurozone inflation data before the end of the week, particularly if it surprises investors.
Euro (EUR) Exchange Rates Boosted as German Consumer Confidence Beats Forecasts
Some optimistic stats from this week’s mixed Eurozone confidence survey data had been enough to keep the Euro buoyant.
Thursday morning saw the publication of Germany’s July consumer confidence survey from GfK, which was forecast to slip to 10.6. The actual figure came in at 10.7.
While GfK noted that trade tensions between the US and Eurozone had had an impact on the consumer mood, there was surprising resilience too due to strong employment prospects in Germany. According to Rolf Buerkl from GfK:
‘The ongoing excellent employment prospects are apparently outweighing the current negative global economic influences on the indicator,
However, the consumer economy in Germany remains intact, even if it is slightly less dynamic.’
Euro trade has also been solid ahead of June’s inflation projections for Germany and the bloc overall, which will be published towards the end of the week.
Pound (GBP) Exchange Rate Performance Limited by Bank of England Uncertainty
Despite the seemingly hawkish tone the Bank of England (BoE) took in its June policy decision last week, the bank hasn’t shown that same level of confidence this week and has instead been focusing on the uncertainty surrounding the Brexit process.
Investors have been hesitant to buy the Pound this week as they await some major UK data releases, but if Britain’s growth results on Friday are concerning in some way Sterling’s longer-term outlook could remain weak.
This is partially because the Brexit process has been a consistent dampener on Sterling’s appeal recently, due to concerns that progress is being made too slowly.
BoE Governor Mark Carney took a cautious stance in a Wednesday speech.
According to David Madden, market analyst from CMC Markets:
‘Carney’s warnings that there would be turmoil if an agreement is not reached before the UK leaves the EU is putting some pressure on Sterling.’
Euro to Pound Forecast: EUR/GBP Outlook Could be Influenced by Friday’s Data
As the Eurozone economic outlook seems relatively resilient in the face of US trade jitters, investors are greatly anticipating the latest Eurozone inflation figures.
Friday will see the publication of a slew of Eurozone ecostats, including German retail sales and unemployment, as well as Consumer Price Index (CPI) data from France and the Eurozone bloc.
The Eurozone inflation projection will be particularly influential. If Eurozone inflation is stronger than expected, European Central Bank (ECB) interest rate hike bets could rise, sending the Euro higher.
Sterling’s Q1 Gross Domestic Product (GDP) results could be even more influential though, as they could impact Bank of England (BoE) interest rate hike bets.
If the UK growth report beats forecasts, investors will be more confident that Britain’s economic slowdown was not as bad as feared and that the economy could sustain higher interest rates.
Britain’s Q1 business investment results, also due on Friday, may further influence the Euro to Pound (EUR/GBP) exchange rate.
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