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Pound Sterling to Euro Exchange Rate Gains Limited as Eurozone Outlook Shows Further Signs of Strength

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Pound to Euro Exchange Rate Climbs on Latest Brexit Hopes May be Temporary

Weakness in both the Pound (GBP) and Euro (EUR) caused mixed movement in the Pound Sterling to Euro (GBP/EUR) exchange rate last week. While the mixed movement has continued so far this week, it is instead due to both currencies strengthening.

Following last week’s modest GBP/EUR gain from 1.1555 to 1.1574, the pair has already seen losses and gains since markets opened yesterday.

Yesterday, GBP/EUR briefly touched on a fortnight high of 1.1614 before slumping again and trending lower.

Today, GBP/EUR advance attempts have been weaker. Despite higher demand for the Pound amid fresh Brexit deal hopes, the Euro has also found stronger support thanks to the latest Eurozone growth data.

For now, investors are waiting to see how Brexit news and Eurozone data will unfold for the rest of the week.

Pound (GBP) Exchange Rates Bolstered by Hopes for Brexit Agreement

For most of the past month, the UK government has been engaged in ongoing talks with the opposition Labour Party regarding a possible compromise that could make the government’s Brexit plan popular enough to pass through Parliament.

After weeks of doubts that the talks would produce much in the way of a solution, this week has seen a small boost in speculation that talks could be getting closer to reaching a compromise.

This, as well as hopes that the Labour Party could support a second referendum in some way, bolstered the Pound’s appeal today.

However, while this boost in Brexit optimism helped the Pound to advance today, it may prove temporary. Sterling could easily shed those gains again if there is no solid indication of Brexit progress by the end of the week.

Euro (EUR) Exchange Rates Avoid Major Losses as Eurozone Data Shows Promising Signs

Following weeks of poor Eurozone data and low business and consumer confidence throughout the bloc, investors were finally given fresh and more solid signs of Eurozone resilience in this morning’s Eurozone growth data.

While France’s Q1 Gross Domestic Product (GDP) growth rate projection met expectations, Spain’s beat forecasts and so did the overall Eurozone print.

The Eurozone’s Q1 growth is projected to have grown at a better than expected 0.4% quarter-on-quarter, and 1.2% year-on-year.

However, despite this and news that the Eurozone’s unemployment rate had hit a 10-year-low, the Euro was unable to advance versus Sterling.

According to Esther Maria Reichelt, FX Strategist at Commerzbank:

‘The data offers some relief to traders though it is still too early to say if the risks over the economy has completely lifted,’

Pound to Euro (GBP/EUR) Exchange Rate Investors Anticipate Brexit News and PMI Data

Could there finally be solid Brexit developments this week after weeks of uncertainty? Depending on whether or not there is, the Pound outlook could shift.

For example, if the Labour Party indicates that it could support a second referendum in some way, the Pound outlook would strengthen.

Sterling would also benefit if the negotiations between the government and Labour Party show any solid signs of progress.

The opposite is also true though. If there are no Brexit developments soon, the Pound’s outlook will remain filled with uncertainty and could shed its recent advance attempts.

Euro investors, on the other hand, will be awaiting more signs that the Eurozone economy is recovering from the economic slowdown.

This means that Thursday’s final April Eurozone PMI results could be very influential. The projections were particularly disappointing, so if there is improvement in the final stats the Pound to Euro (GBP/EUR) exchange rate could fall.