Could Pound to Euro Exchange Rate Rebound Following Last Week’s Tumble?
A lack of new developments in the Brexit process, combined with lasting fears that a No-deal Brexit is possible, left the Pound Sterling to Euro (GBP/EUR) exchange rate tumbling last week. However, German growth fears helped the pair to avoid further losses.
Last week saw GBP/EUR shed most of the previous week’s strong gains as Brexit uncertainties returned. GBP/EUR opened the week at the level of 1.1579 and lost a cent and a half throughout the week, closing at the level of 1.1417.
This week so far, GBP/EUR movement has been limited. The pair edged higher on Monday morning due to German growth concerns, but its gains were modest at best.
Concerns about a lack of Brexit developments and uncertainty over how the Brexit process would proceed continued to keep pressure on the Pound (GBP), even though the Euro (EUR) was weak.
Lasting Brexit uncertainties could prevent the Pound from seeing much in the way of a rebound.
Pound (GBP) Exchange Rates Weighed by Brexit, UK Data
Much of the Pound to Euro (GBP/EUR) exchange rate’s losses last week were due to weakness in the Pound.
Investors sold the British currency as UK Parliament voted in favour of the government attempting to renegotiate the controversial Irish backstop part of its Brexit plan.
However, the government is not expected to be able to gain any ground in negotiations versus the EU, which has indicated its position on the backstop will not change.
As a result, concerns persist that the government’s Brexit plan will remain unable to pass into law. With less than two months to go until the formal Brexit date, No-deal Brexit fears re-emerged and dragged on the Pound.
Weak UK data also weighed on Sterling at the end of last week. Britain’s January manufacturing PMIs printed at a disappointing 52.8, worsening concerns that Britain’s manufacturing sector could be nearing recession.
Euro (EUR) Exchange Rates Weaken on German Recession Fears
While the Pound’s gains were limited due to Brexit jitters, the Euro still weakened this morning as markets continued to digest last week’s disappointing set of German datasets.
Throughout the last week, German inflation, retail sales, unemployment and manufacturing PMI data all fell short of market expectations.
The data indicated that Germany’s economy was more heavily hit than expected by US-China trade tensions and the slowing global economic outlook.
Analysts noted that Germany’s economic slowdown was likely to last longer than previously expected due to the disappointing data, and Deutsche Bank even speculated that Germany could be headed towards a recession:
‘While a technical recession might be avoided by a hair’s breadth with a positive Q4 number, the development of several key cyclical indicators is telling us that the German economy is drifting towards recession right now’
German growth fears weighed on the Euro this morning and helped GBP/EUR to avoid further losses.
Pound to Euro (GBP/EUR) Exchange Rate Investors Anticipate PMIs and German Factory Stats
While Brexit uncertainties continue to drive the Pound, Euro investors are anticipating this week’s upcoming German and Eurozone ecostats which could drive the Pound to Euro (GBP/EUR) exchange rate too.
Markit’s services and composite PMI stats from throughout the Eurozone will be published on Tuesday. UK PMIs will also be published, as will Eurozone retail sales stats from December.
Towards the second half of the week, more influential German data will be published including German factory orders, construction PMI, industrial production and trade balance figures.
While the Euro is influenced by data and Germany’s economic outlook, potential Brexit developments could drive the Pound.
If the EU shows any signs that it will offer concessions over Brexit, soft Brexit hopes would rise and the Pound would surge.
However, the Pound to Euro (GBP/EUR) exchange rate could be kept under pressure if there are no optimistic Brexit developments this week.