With the Pound supported and the pace of construction output in the Eurozone slowing in February, the Euro was the weak link in the Euro to Pound exchange rate on Tuesday.
Last week’s shockingly strong UK employment data helped the Pound break out of its narrow trading range against the Euro and consolidate its position above 1.21.
As markets reopened following the four-day Easter weekend, the Euro was in a stronger position against the US Dollar but remained weaker against the Pound.
Concerning inflation data for the Eurozone, an unexpectedly steep decline in German producer prices and a 3.1 per cent monthly decline in Italian industrial orders all weighed on the Euro last week, and several industry experts have stressed that the European Central Bank needs to introduce additional stimulus in order to offset inflation pressures.
Meanwhile, a recent report in the Financial Times argued that the strength of the Pound has helped support Britain’s economic recovery.
While some investors have voiced concern over Sterling’s rising exchange rate, Stephanie Flanders of the FT’s has argued; ‘The rise in the Pound has probably done more to ease the ‘cost of living’ crisis for UK families than three years of stop-start recovery. I think it will also do more good than harm for the broader economy, helping to make the current pace of growth more sustainable without derailing our hopes of becoming net exporters.’
On Tuesday a lack of UK news limited Pound movement, and Euro volatility was also low ahead of tomorrow’s Markit services and manufacturing PMI reports for the Eurozone and its largest economies.
The Euro was little changed after a domestic report showed that construction output in the Eurozone eased sharply, with output advancing just 0.1 per cent in February month-on-month following a monthly increase of 1.6 per cent in January.
On the year construction output was up 6.7 per cent, down from the annual gain of 8 per cent recorded the previous month.
Some Euro fluctuations could occur in the hours ahead as the Eurozone’s consumer confidence gauge is published.
A reading of -9.3 is expected for April.
Tomorrow factors likely to trigger Euro to GBP movement include the publication of minutes from the Bank of England policy meeting, UK public finance data and Eurozone PMI reports.
Over the rest of the week data to watch out for includes German IFO surveys and UK retail sales figures.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8205,
Euro,,US Dollar,1.3802,
Euro,,Canadian Dollar,1.5201,
Euro,,Australian Dollar,1.4744,
Euro,,New Zealand Dollar,1.6081,
US Dollar,,Euro ,0.7244,
Pound Sterling,,Euro,1.2189,
Canadian Dollar,,Euro,0.6575,
Australian Dollar,,Euro,0.6782,
New Zealand Dollar,,Euro,0.6217,
[/table]
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