Sliding UK Card Spending Keeps Pound Euro Exchange Rate Under Pressure
Another sharp contraction in UK credit card spending failed to knock the Pound Euro (GBP/EUR) exchange rate out of a narrow range at the start of the week.
While the -1.2% drop in spending points towards a further diminishing of domestic consumer confidence this was not enough to provoke significant Pound (GBP) weakness.
Even though jitters remain over the UK economic outlook, and the likely outcome of Brexit negotiations, the downside potential of GBP exchange rates remains somewhat limited at this juncture.
However, the mood towards the Euro (EUR) was similarly muted thanks to concerns over the domestic political outlook.
As German Chancellor Angela Merkel’s position still looks rather tenuous, in spite of the SPD agreeing to a fresh coalition, the prospect of any meaningful push towards Eurozone integration looks rather distant.
Euro Downside Limited on Hopes of Positive Eurogroup Meeting
Some volatility could be in store for the GBP/EUR exchange rate if the latest Eurogroup meeting of finance ministers yields fresh progress on the matter of Greece.
The release of the next tranche of bailout funds would give investors renewed cause for confidence in the prospect of Greece successfully exiting its bailout program later this year.
Even so, any signs of disunity within the Eurogroup could still put some downside pressure on EUR exchange rates in the short term.
Confirmation that the German and Eurozone consumer price indexes both lost momentum on the year in February may encourage further selling of the Euro this week.
However, as these inflation figures are unlikely to offer any fresh insight their ultimate impact could well be somewhat limited.
Commentary from European Central Bank (ECB) policymakers may struggle to boost the GBP/EUR exchange rate this week, though, even if the tone proves more dovish on the whole.
As Viraj Patel, research analyst at ING, noted:
‘With the Eurozone enjoying a massive 3.5% GDP current account surplus and the EUR not particularly volatile, we suspect it will be very hard for EZ finance officials to talk down the EUR. In fact, the latest set of ECB staff projections has the EZ’s current account surplus rising to 4.5% in 2020.’
Pound Exchange Rate Momentum Forecast to Remain Limited on UK Spring Statement
Chancellor Philip Hammond’s spring statement is not forecast to offer any particular support to the GBP/EUR exchange rate, meanwhile.
While the statement is expected to show an upgrade to public finance forecasts this is does not appear set to be accompanied by all that much in the way of policy action.
As Hammond clearly intends the spring statement to cause less of a stir than the usual Budget would have done the Pound may struggle to find any particular traction on Tuesday.
Nevertheless, markets could still have some marked reaction to Hammond’s presentation if the accompanying forecasts prove more optimistic than anticipated.
Any downside surprises or signs of fiscal caution, though, may leave the GBP/EUR exchange rate to trend lower once again.