The EUR GBP exchange rate rallied from a three-week low on Friday as businesses in the Eurozone fared better than expected in March.
IHS Markit reported that both the Manufacturing and Service PMIs saw solid grow this month with activity in each sector rising from 55.4 to 56.2 and 55.5 to 56.4 respectively.
Markets were impressed by the robust figures as it suggested that business outlook remains upbeat despite potential disruption from the upcoming French elections.
Bert Colijn, a senior Eurozone economist at ING, said;
‘While political uncertainty in the Eurozone itself and among its larger trade partners continues to be high, sentiment among Eurozone businesses about activity in the coming year continues to improve.’
The positive figures also lead analysts to speculate that first quarter growth could reach a two year high, so long as there are no major economic hiccups in the Eurozone over the next month.
Meanwhile the Pound fell yesterday as the British Bankers’ Association (BBA) announced that Mortgage approvals struck a three-month low last month.
Eric Leenders, BBA Managing Director for Retail Banking said;
‘Elevated approval volumes for house purchases and re-mortgaging experienced during the winter months fell back in February, to average levels seen throughout most of last year.’
The drop was partially attributed to market uncertainty as buyers felt reluctant to make major purchasing decisions ahead of Brexit, especially at a time when household budgets are also being pressured by rising inflation and weak wage growth.
Looking ahead the Pound is likely to cede ground next week when Prime Minister Theresa May triggers Article 50 on Wednesday. This will be the first time the Article has been invoked and will kick off up to two years of complex negotiations between the UK and EU.
The process is likely to create a great deal of uncertainty for the two currencies, with most analysts predicting that Sterling well bear the brunt of market pressure as the UK government plans to pursue an agreement that will see Britain lose access to the single market.
Meanwhile the Euro may advance on Monday if Ifo reports that Germany’s Businesses Confidence remained robust in March, with analysts predicting sentiment will remain at 111.
Current Interbank Exchange Rates
At the time of writing the EUR GBP exchange rate was trending around 0.86 and the GBP EUR exchange rate was trending around 1.15.
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