Pound to Euro Exchange Rate Losses Limited as Investors Remain Concerned about Eurozone Outlook
Despite some disappointing UK data and cooling Brexit speculation, the Pound Sterling to Euro (GBP/EUR) exchange rate still sustained major gains last week. This was largely due to Brexit hopes, but Eurozone economic concerns also made it easier for the pair to hold its ground.
After opening last week at the level of 1.1578, GBP/EUR briefly dipped before surging higher.
GBP/EUR then spent most of the second half of the week gradually climbing even higher, briefly touching highs near 1.1750 on Friday, which were its best levels in over a month.
While the Pound’s (GBP) appeal briefly slipped towards the end of the week, concerns about the Eurozone’s economic outlook left the Euro overall less appealing in comparison.
Investors are now looking ahead to potential Brexit news in the coming week, as well as the Eurozone’s anticipated upcoming data.
Pound (GBP) Exchange Rate Strength Pressured by UK Data and Brexit Uncertainties
For most of last week, investors bought the Pound, driving the currency higher amid speculation that the Brexit process could end with a softer outcome.
Brexit uncertainties left the Pound limp for much of April, but fresh reports that the government and Labour Party were becoming more optimistic about the chances of a cross-party Brexit deal left to a Pound surge last week.
However, while hopes for a softer Brexit made the Pound much more appealing, a lack of solid news or developments meant that the Pound’s outlook was largely unchanged by Brexit news throughout the week.
Bank of England (BoE) news had a mixed and limited impact on Sterling movement, but may have had more of an impact on the outlook.
Towards the end of the week, the Pound found it easier to avoid losses thanks to a more hawkish than expected tone from the bank’s latest policy decision.
The BoE indicated that it would likely hike rates more than markets currently expected.
Euro (EUR) Exchange Rates Remain Unappealing as Investors Await More Data
Continued signs that the Eurozone’s economic outlook is being weighed by a global growth slowdown weighed heavily on the Euro last week.
Some notable Eurozone ecostats, including Eurozone growth and inflation figures, beat market expectations last week and bolstered hopes that the Eurozone economy hasn’t performed as poorly as expected this year so far.
However, signs of a Eurozone economic rebound remain too mixed for investors to be confident that a rebound will happen.
Instead, investors remain concerned due to other figures indicating that the slowdown may be persisting. April’s final Markit manufacturing report was published last week, and German manufacturing contracted even more deeply than forecast.
At the end of the week, the Euro failed to benefit from strong Eurozone inflation data due to concerns that inflation would slow down in May.
Pound to Euro (GBP/EUR) Exchange Rate Outlook Depends on Brexit News and Eurozone Data
After last week’s Brexit rumours and mixed Eurozone data did little to influence the Pound to Euro (GBP/EUR) exchange rate outlook, will next week’s upcoming news prove more influential?
The Pound outlook is still unlikely to change much without a solid Brexit development of some kind.
For example, if government Brexit negotiations have some kind of optimistic outcome the Pound would surge, but a breakdown in talks could instead make the Pound shed some of last week’s impressive gains.
Even Britain’s upcoming growth rate report, due on Friday, may not influence the Pound outlook much if market focus remains transfixed on Brexit.
Instead, Eurozone data is much more likely to have an impact on the GBP/EUR outlook in the coming week.
Some of the week’s most influential data will be published on Monday, when UK markets are closed for a bank holiday. Eurozone services and composite PMI stats, as well as March retail sales results, could bolster the Eurozone outlook if they impress.
Given Germany’s disappointing manufacturing sector in recent months, the Pound to Euro (GBP/EUR) exchange rate outlook would also worsen if upcoming German factory, production and trade data impresses investors throughout the week.