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GBP to EUR Exchange Rate Pressured by Better Than Forecast Eurozone Ecostats

February 27, 2018 - Written by Toni Johnson

Amid a lack of supportive UK data and a slightly stronger Euro on Tuesday, the British Pound to Euro (GBP/EUR) exchange rate has slipped. The Euro has been supported by stronger than expected Eurozone data, but political uncertainties have limited the shared currency’s gains.

A stronger Pound helped the GBP/EUR exchange rate climb from 1.1300 to 1.1362 last week and the pair touched on fortnight high of 1.13989 on Monday. However, the pair has since fallen from that high and has shed almost half of last week’s gains. The pair trended around the level of 1.1318 on Tuesday.

GBP Fails to Find Support as Brexit Uncertainties Persist


Investors are hesitant to buy the Pound this week amid a lack of supportive ecostats in recent sessions, as well as a lack of any real changes to the Bank of England (BoE) or Brexit outlook.

Sterling briefly surged on Monday as investors digested comments from Bank of England Deputy Governor Dave Ramsden.

Typically one of the bank’s more dovish members, Ramsden hawkishly noted that UK interest rates may need to rise again ‘somewhat sooner rather than somewhat later’.

However, as investors are awaiting more UK data before fully pricing in a May interest rate hike from the BoE, it had little sustained impact on Sterling.

The Brexit boost Sterling enjoyed on Monday was also short-lived.

Britain’s opposition Labour Party clarified its stance on Brexit with a speech from Labour Leader Jeremy Corbyn. Corbyn stated that a Labour government would aim to keep Britain in an EU customs union and maintain a close relationship with the single market, even without full membership.
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Markets hoped that Labour could vote together with Conservative backbenchers on an amendment to a government bill and push for customs union membership to be part of Brexit negotiations.

However, Conservative backbenchers later indicated they did not intend to vote with Labour, so the Pound’s brief boost on ‘soft Brexit’ hopes was short-lived.

Analysts also expect that general market uncertainty is keeping a lid on Pound appeal, particularly in the US. According to Lee Hardman, currency strategist from MUFG;

‘While the Pound’s outlook has improved in recent days thanks to the renewed optimism from the central bank, investors are wary of pushing the British currency higher from these levels unless there is more clarity on the dollar’s outlook,’


EUR Supported by Eurozone Confidence Stats


Tuesday morning saw the publication of the Eurozone’s final confidence survey results for February, and while many prints slipped from January the data generally beat expectations.

February services sentiment was forecast to slip from 18.4 to 16.3, but instead climbed from a revised 16.8 to 17.5.

Economic sentiment slipped from a revised 114.9 to 114.1, beating expectations of falling to 114.0. Business confidence also beat expectations, falling from 1.56 to 1.48 rather than the forecast 1.47.

Consumer confidence slowed from 1.4 to 0.1 as expected and consumer inflation expectations slipped from 19.6 to 18.0, but overall the data painted an optimistic picture of confidence in the Eurozone.

Spain’s February inflation projections came in higher than forecast too, rising to 0.1% month-on-month and 1.1% year-on-year, helping to boost the shared currency on Tuesday.

GBP/EUR Forecast: Eurozone Inflation in Focus on Wednesday


Tuesday afternoon will see markets focusing on US news, particularly from the Federal Reserve. If US uncertainty lightens, it could spark some market movement.

Failing that though, a slew of influential Eurozone data due for publication on Wednesday has the potential to impact the Euro outlook.

GfK will be publishing its latest UK and German consumer confidence survey results on Wednesday morning which could influence some Pound and Euro trade.

However, Eurozone data due later in the morning including German unemployment, French inflation and growth and of course the Eurozone’s February inflation projection could prove even more influential.

As the European Central Bank (ECB) has predicted that Eurozone inflation will remain steady but subdued in the coming months, better than expected Eurozone inflation figures could boost ECB speculation and make the Euro more appealing.

On the other hand though, political uncertainty ahead of next Sunday’s 2018 Italian election and German SPD Party poll could leave the Euro unappealing even if Eurozone data impresses.
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