EUR to GBP Exchange Rate Advances as UK Ecostats Disappoint

April 7, 2017 - Written by Ben Hughes

STORY LINK EUR to GBP Exchange Rate Advances as UK Ecostats Disappoint

The Euro to British Pound exchange rate fluctuated on Thursday, but began to put in a modest advance on Friday morning following the day’s solid German data and poor UK stats. EUR/GBP looked likely to sustain gains this week.

EUR/GBP began the week trading at the level of 0.8492 and briefly hit a high of 0.8588 on Wednesday before shedding some of its gains. The pair trended in the region of 0.8550 on Friday morning.

EUR Strength Limited by Dovish ECB Officials

Despite the Pound’s weakness towards the end of the week, the Euro failed to capitalise due to its own weakness. This has been largely due to comments made by high ranking officials in the European Central Bank (ECB).

Thursday saw ECB President Mario Draghi hold a speech in which he indicated that while risks to growth were receding, the bank was still not successful enough to begin to draw back its ultra-loose monetary policy.
Draghi also indicated that the bank would not consider tightening monetary policy again until after its quantitative easing (QE) program has concluded.

Draghi’s sentiment was reflected by ECB board member Peter Praet and ECB Vice President Vítor Constâncio later in the day. As a result, disappointed Euro traders weren’t in a hurry to rush into the shared currency on Friday even when German trade and industrial production stats beat expectations.

GBP Slips as UK Ecostats Disappoint

The past week has seen numerous UK ecostats indicate to analysts that Britain’s economy may be slowing down, which has limited demand for the Pound.

While Sterling recovered from its worst levels due to better-than-expected UK services PMIs from March, other PMIs as well as Friday’s set of UK ecostats left the Pound lower this week overall.

Friday morning saw Britain’s February trade deficit worsen further than hoped, from -£2.98b to -£3.66b. Other February data, such as construction output, industrial production and manufacturing production also all failed to meet market expectations.

Notably, the manufacturing and industrial production prints saw month-on-month contractions, letting down hopes that those sectors would recover in February.

EUR/GBP Forecast: UK Inflation in Focus Next Week

Next week’s Eurozone economic calendar will be a little quieter after the past week’s slew of Eurozone data, but Tuesday’s session will give EUR/GBP traders plenty to react to.

Britain’s March Consumer Price Index (CPI) results will be published on Tuesday. If they come in above expectations, the amount of perceived pressure on the Bank of England (BoE) to tighten UK monetary policy will increase.

Tuesday will also see ZEW publish its April economic sentiment surveys for Germany and the Eurozone. Eurozone industrial production stats for February will also come out.

Wednesday’s session will also be vital for Pound movement, as February’s UK job market report will be published as well as March’s jobless claims figures.

Ultimately the Euro to Pound exchange rate could shed its recent recovery next week if Britain’s inflation stats impress. However, ongoing concerns about Britain’s potentially slowing economy could make it difficult for Sterling to advance.

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