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Pound Euro Exchange Rate Slips as Eurozone Economic Sentiment Hits Highest Level Since 2018

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Rising Eurozone Economic Sentiment Keeps Pound Euro Exchange Rate on Back Foot

The Pound to Euro (GBP/EUR) exchange rate struggled to find traction in the wake of an improved Eurozone economic sentiment index.

A surprise uptick saw the sentiment index rise from 100.9 to 110.3 in April, suggesting that confidence within the currency union recovered at the start of the second quarter.

With confidence at its highest level since 2018 worries over the economic outlook naturally diminished, with signs pointing towards the diminishing impact of the Covid-19 crisis.

Although the Eurozone remains under pressure as a result of the pandemic this was not enough to limit the appeal of the Euro (EUR) at this stage.

As the service sector has also shown signs of returning to a positive state of growth hopes of a stronger second quarter gross domestic product performance helped to shore up EUR exchange rates.

Pound Looks for Support on Recovering Nationwide Housing Prices

Demand for Pound Sterling (GBP) could pick up ahead of the weekend, however, if April’s Nationwide housing price index proves encouraging.

After the -0.2% monthly contraction seen in March investors are hoping for a moderate rebound in price growth, pointing towards a strengthening housing market.

As stronger levels of housing demand had helped to shore up the UK economy over the course of the last year any fresh signs of growth could give the Pound a leg up against its rivals.

With the economy continuing on its path towards reopening as national lockdown conditions ease further hopes of greater economic strength may keep GBP exchange rates on a positive footing.

On the other hand, another month of weakening house price growth may put a fresh dampener on the Pound.

As markets have already priced a high degree of economic optimism into GBP exchange rates the impact of the housing market data could prove limited.

Negative First Quarter German Growth Rate Set to Weigh on Euro Demand

Support for the Euro may weaken on Friday, meanwhile, with the release of the flash first quarter German gross domestic product report.

With forecasts pointing towards a sharp quarterly growth contraction of -1.5% in the first three months of 2021 the single currency could face a fresh bout of selling pressure.

Even though the Eurozone’s powerhouse economy has shown signs of recovering momentum in April a sharp decline in the first quarter growth rate could still weigh heavily on EUR exchange rates.

Unless the growth data can defy expectations and deliver a smaller dip in momentum the Euro may struggle to hold onto a positive footing in the near term.

A similarly underwhelming performance from the first quarter Eurozone GDP data could also offer the Pound to Euro exchange rate a boost heading into the weekend.