While the Euro began the local session in a stronger position against the Pound, the British asset swiftly recouped losses and adopted a more bullish relationship with its European cousin.
Although separate reports for the Eurozone showed improvement in the currency bloc’s services sector and an unexpected increase in retail sales in March, the Pound was able to strengthen against the Euro thanks to the UK’s surprisingly upbeat Markit services PMI.
While economists had anticipated a month-on-month decline in retail sales of 0.2 per cent in March, they actually increased by 0.3 per cent.
Sales were up 0.9 per cent on the year.
However, the report also indicated that the recovery in European trade is tentative at best, as trade flows in the non-food sector dropped by 0.3 per cent MoM.
Meanwhile, final services PMI for France surprised to the upside while the German and Eurozone measures showed reasonable expansion in April.
German services growth accelerated last month, with the gauge jumping from 53.0 in March to 54.7 in April.
In the opinion of Markit economist Oliver Kolodseike; ‘April data signalled a continuation of the economic upturn in Germany’s services sector, with output growth accelerating since the previous month and above the average for the first quarter. New orders also rose at a sharper rate, suggesting that March’s relatively weak data were only a temporary soft patch.’
While this news (coupled with the expectation that the European Central Bank will leave fiscal policy unaltered when it meets this week) lent the Euro support and pushed the EUR/USD pairing to a seven-week high, the Pound was performing well against the common currency as the local session progressed.
The UK Markit services report showed a surprise increase to 58.7 in April from 57.6 in March. Economists had anticipated a more modest increase to 57.8.
The composite measure read 55.1, up from a positively revised 54.2 and clear of the 50 mark separating growth from contraction.
As last week’s UK manufacturing data came in above expectations, this report adds to the view that the nation’s economy got off to a good start in the second quarter.
The Pound broadly strengthened in response to the news – although the Eurozone’s positive data did restrain Pound to Euro movement somewhat.
While today’s US trade balance report could impact currency market movement in the hours ahead, investors with an interest in the Euro to Pound exchange rate will be looking to tomorrow’s German factory orders figures and Thursday’s Bank of England/European Central Bank rate decisions.
Euro to GBP update 07/05/14
The Euro softened against the Pound on Wednesday due to the release of a number of disappointing data releases from Germany and France.
Data released by the German economy ministry showed that factory orders in the Eurozone’s largest economy fell sharply in March as demand for consumer and capital goods fell both at home and abroad. Demand was especially weak from other Eurozone countries. The ministry also warned that the conflict in
Ukraine could add further weakness next month.
Industrial orders slumped by 2.8% in March, the steepest decline recorded since November 2012. The figure was also far worse than economist forecasts for a slight rise.
Data out of France added to the gloomy German report. The Eurozone’s second largest economy saw its trade balance deficit widen to -€4,9 billion in March, worse than the previous figure of -€3.77 billion and was worse than forecasts for -€4.0 billion.
Month on month industrial production also declined more than expected with March seeing a contraction of -0.7%, year-on-year production fell by -0.2%.
Both figures were worse than expected.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8218,
Euro,,US Dollar,1.3923,
Euro,,Canadian Dollar,1.5241,
Euro,,Australian Dollar,1.4970,
Euro,,New Zealand Dollar,1.5957,
US Dollar,,Euro ,0.7181,
Pound Sterling,,Euro,1.2169,
Canadian Dollar,,Euro,0.6561,
Australian Dollar,,Euro,0.6684,
New Zealand Dollar,,Euro,0.6265,
[/table]
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