Pound to Euro Exchange Rate Could Weaken if Eurozone Data Shows Signs of Strength
Last week saw relatively wide fluctuations in the Pound Sterling to Euro (GBP/EUR) exchange rate, as the Pound (GBP) was driven largely by movements in its rivals while the Euro (EUR) was sold across the board due to lasting concerns about a Eurozone economic slowdown.
After opening last week at the level of 1.1553, GBP/EUR trended lower for the first half of the week and briefly touched on a fresh two-month-low of 1.1521.
In the middle of the week though, GBP/EUR saw a surge in recovery as investors digested the latest disappointing Eurozone data, and towards the end of the week the pair was trending closer to the level of 1.1580.
The Euro remained highly unappealing as Eurozone data continued to indicate that the bloc was being hit by a global economic slowdown, with few signs so far that the Eurozone economy is recovering.
Amid hopes for signs of a Eurozone recovery, an upcoming slew of Eurozone ecostats is likely to be the biggest influence for the Pound to Euro exchange rate next week.
Pound (GBP) Exchange Rate Advances Limited by Brexit Uncertainties
While the Pound to Euro exchange rate advanced last week, the Pound’s outlook is filled with uncertainties due to a lack of a clear path for the Brexit process to take next.
Last week saw UK Parliament resume following its Easter recess, but an early-week boost in hopes for a Brexit solution to be reached quickly was short-lived.
Instead, investors remain anxious that the government’s cross-party talks appear to be producing no major progress or results so far, and Parliament appears no closer to reaching a solution on how to proceed with Brexit next.
Sterling’s movement was little-changed by the week’s UK data either.
The Confederation of British Industry’s (CBI) retail data beat expectations on Thursday, but Friday’s business confidence and factory stats saw disappointing contractions.
Overall, the Pound’s early-week losses and late-week gains were more due to movement in the Euro.
Euro (EUR) Exchange Rates Unappealing amid Continued Signs of Eurozone Slowdown
Earlier in April, speculation had risen that the Eurozone’s economy was beginning to rebound from months of economic slowdown. However, the latest data indicates that the bloc isn’t out of the woods just yet.
Since some disappointing April Eurozone PMI projections published the week before last, Eurozone data continues to come in short of forecasts and worsen concerns about the bloc’s economic activity.
In the first half of last week, Eurozone consumer confidence projections fell short, as did France and Germany’s latest business confidence figures.
French consumer confidence from April rounded off the week yesterday, printing at 96 again rather than climbing to the forecast 97.
On top of poor Eurozone data though, the Euro has also been unappealing due to strength in its rival, the US Dollar (USD). The two rival currencies have a negative correlation, so the Euro often weakens in times of US Dollar strength.
Pound to Euro (GBP/EUR) Exchange Rate Outlook Could be influenced by Major Eurozone Data
As the past week’s Pound to Euro exchange rate gains were caused by weak Eurozone data causing a Euro selloff, Eurozone data is likely to remain the most influential factor next week as well, unless there are surprising Brexit developments.
Slews of influential Eurozone data will be published throughout the week, starting off with the bloc’s final April business and consumer confidence stats on Monday.
Tuesday’s slew of data includes German consumer confidence, unemployment and inflation, as well as French growth data and inflation, and overall Eurozone unemployment and growth rate data.
This will be followed towards the end of the week by the Eurozone’s final April manufacturing PMIs on Thursday, and the bloc’s April inflation rate figures on Friday.
Some UK data to watch out for includes PMI results from Wednesday through Friday, and the Bank of England’s (BoE) May policy decision on Thursday.
Unless the data or the bank’s tone has some impact on the Brexit outlook though, Pound to Euro (GBP/EUR) exchange rate investors are more likely to anticipate Eurozone data or Brexit developments.