EUR to GBP Exchange Rate Struggles to Avoid Losses after Eurozone Confidence Disappointment

April 23, 2019 - Written by James Fuller

STORY LINK EUR to GBP Exchange Rate Struggles to Avoid Losses after Eurozone Confidence Disappointment

Despite poor Eurozone data last week, the Euro to British Pound (EUR/GBP) exchange rate briefly saw a jump in demand yesterday. A rebounding Pound combined with further weak Eurozone data meant the pair more or less shed those gains today, though. Investors are now looking ahead to further Eurozone data and potential Brexit news.

After edging higher from the level of 0.8646 to 0.8654 on Eurozone hopes and Brexit uncertainties last week, EUR/GBP has already seen mixed movement this week so far. EUR/GBP briefly neared last week’s monthly high of 0.8679 in quiet Monday trade, before tumbling back again and trending closer to the level of 0.8653 at the time of writing today.

There was little reason for EUR/GBP’s Monday jump, with investors moving positions amid quiet bank holiday trade while Brexit uncertainties continued to pressure Sterling.

Tuesday saw a little more influenced direction in EUR/GBP however. Investors sold the Euro on Eurozone economic uncertainties and strong rivals, while Brexit hopes benefitted the Pound.

EUR Exchange Rates Remain Unappealing as Eurozone Consumer Confidence Disappoints

At the beginning of the week, the Euro continued to climb versus the Pound despite last week’s disappointing Eurozone ecostats. This was due largely to quiet bank holiday trade causing volatility.

Ultimately, the Euro failed to sustain these gains regardless. The latest Eurozone data continues to point towards economic weakness in the bloc and cast doubt over hopes that the Eurozone’s economy is already rebounding strongly from months of slowdown.

Following the disappointing Eurozone PMI projections from Markit at the end of last week, today saw the publication of the Eurozone’s April consumer confidence projections.

The confidence projections were forecast to lighten slightly, from -7.2 to -7.0. Instead though, the contraction deepened to a disappointing -7.9.

On top of the latest disappointing Eurozone data, and Tuesday’s US Dollar (USD) strength causing weakness in the Euro as rival currencies, Euro investors are also anxious that tensions between the EU and Italy’s government could flare up again.

GBP Exchange Rates Rebound from Lows as UK Parliament Returns from Recess

Investors bought the Pound back from its brief Monday lows during today’s session, but the British currency’s movement was limited and volatile as investors expect further Brexit uncertainty in the outlook.

UK Parliament began an Easter recess on the 11th of April, and reconvened today as markets opened following the Easter weekend.

While Parliament was closed, Pound volatility lightened significantly as investors bet that there would be no fresh major developments in Brexit or UK politics within the imminent future.

However, now that Parliament has resumed, volatility has already worsened again due to speculation that UK Prime Minister Theresa May could face fresh pressure to resign, or that Parliament could see another meaningful vote on Brexit within the next few weeks.

With fresh political uncertainty already hitting the Pound this week, analysts have warned that more of this is likely on the horizon. According to analysts from the Royal Bank of Canada (RBC):

‘Talks on finding a Brexit compromise between the government and opposition Labour Party recommence today as the UK parliament returns from its Easter break. Meanwhile pressure from within the Conservative Party for PM May to resign is growing.

The 1922 backbench committee is set to meet today with ITV news reporting that its chair, Graham Brady, is planning to tell May that she must resign before the end of June.’

EUR/GBP Exchange Rate Forecast: Further Eurozone Confidence Stats Ahead

After today’s Eurozone confidence data left investors even more doubtful that the Eurozone was going to see a rebound in economic activity within the next few months, the Euro may be in for a fairly bearish week unless upcoming Eurozone data changes that.

Wednesday will see the publication of April business confidence data from both France and Germany. German confidence data from Ifo could be particularly influential if it surprises investors.

Friday will follow with France’s April consumer confidence data.

Of course, if the data continues to disappoint, the Euro to Pound exchange rate will likely see further weakness as this would weigh on the European Central Bank’s (ECB) likelihood of taking a more hawkish tone on monetary policy any time soon.

The Pound, on the other hand, may also be in for losses this week if UK Prime Minister May falls under renewed pressure to resign, or if other Brexit uncertainties flare up.

Thursday’s UK business optimism and factory stats from CBI could also influence the Euro to Pound exchange rate if it surprises investors.

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TAGS: Euro Pound Forecasts