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Pound Euro Exchange Rate Trends Higher as Revised Fourth Quarter UK GBP Boosts Confidence

Improved UK GDP Reading Boosts Pound Euro Exchange Rate

An upward revision to the finalised fourth quarter UK gross domestic product helped to keep the Pound to Euro (GBP/EUR) exchange rate on an uptrend.

With the final GDP reading clocking in at 1.3%, rather than the initially forecast 1%, this offered Pound Sterling (GBP) a boost against its rivals.

Evidence of greater existing resilience within the UK economy gave investors fresh incentive to pile into GBP exchange rates, even as doubts over the first quarter growth outlook linger.

A smaller-than-expected narrowing of the current account deficit also helped to shore up the Pound against its rivals, with worries over the UK’s fiscal health temporarily diminished.

Euro Looks for Fresh Encouragement on German Retail Sales Rebound

The Euro (EUR) could find fresh cause for confidence on Thursday, though, with the release of February’s Germany retail sales figures.

Forecasts point towards a solid rebound in sales on the month, climbing 2% after January’s -4.5% decline.

Signs of consumer confidence starting to recover, in spite of the ongoing Covid-19 disruptions and tightened social restrictions, could see the single currency trending higher.

As long as the retail sector demonstrates a stronger ability to bounce back in the face of the pandemic EUR exchange rates are likely to return to a positive footing.

On the other hand, another month of deteriorating consumer spending could easily weigh on the single currency, to the benefit of the GBP/EUR exchange rate.

Confirmation that the Eurozone manufacturing PMIs delivered another strong month of growth in March may help to keep a floor under the Euro, meanwhile.

Finalised UK Manufacturing PMI Set to Support Pound Exchange Rates

With the finalised UK manufacturing PMI for March also looking set to confirm a solid increase, however, the Pound to Euro exchange rate could find fresh support.

If the manufacturing sector continues to shake off the impact of the national lockdown the odds of a weaker first quarter gross domestic product reading are likely to diminish.

Although the service sector remains the primary contributor to the UK GDP the strength of the manufacturing sector may still help to shore up the wider growth rate.

Even so, as markets have already largely priced the impact of the PMI into the Pound this may limit its potential for fresh movement.

As GBP exchange rates have performed well in recent days this could leave them vulnerable to a degree of correction in the near future.

As trading volumes thin out in anticipation of the Easter weekend this may limit the Pound to Euro exchange rate’s ability to hold onto an uptrend.