Although the Pound is enjoying a bullish relationship with the majority of its currency counterparts this week as upbeat UK employment data and Bank of England rate increase speculation drive Sterling higher, the Euro has been fighting its corner valiantly.
Yesterday the EUR/GBP pairing was able to erase previous declines as manufacturing and services reports for the Eurozone and its two largest economies, France and Germany, exceeded expectations and indicated that the currency bloc’s economic recovery is gathering steam.
The downturn in France has been of particular concern, with many industry experts fearing it could derail the Eurozone’s tentative return to growth, so while both the services and manufacturing sectors contracted the better-than-forecast readings were welcome.
French services PMI came in at 48.6, up from 47.8 in December, while manufacturing PMI jumped from 47 to 48.8 at the close of last year.
Westpac Banking Corp. currency strategist Richard Franulovich said this of the Euro’s upward momentum; ‘The better-than-expected Eurozone purchasing managers’ index figures were the initial trigger for the Euro rally. Emerging-market currencies also fell very hard, and there was a feeling of risk aversion in the market.’
The Euro was lifted further as consumer confidence figures for the Eurozone showed improvement, with the measure advancing from a positively revised minus 13.5 to minus 11.7.
While BoE rate speculation is likely to lend the Pound underlying support for the foreseeable future, the Euro could extend gains against Sterling if German IFO, retail sales and employment reports indicate that the nation is still driving the Eurozone’s recovery.
That being said, UK news will also be of interest.
If UK growth, mortgage approvals and consumer confidence reports add to the case for the BoE raising interest rates from record lows sooner than forecast the Pound could climb.
In the week ahead we foresee the EUR/GBP pairing adopting a neutral-positive outlook.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8260,
Euro,,US Dollar,1.3722 ,
Euro,,Canadian Dollar,1.5193,
Euro,,Australian Dollar,1.5793 ,
Euro,,New Zealand Dollar,1.6637 ,
US Dollar,,Euro ,0.7312,
Pound Sterling,,Euro,1.2108,
Canadian Dollar,,Euro,0.6582 ,
Australian Dollar,,Euro,0.6332 ,
New Zealand Dollar,,Euro,0.6046 ,
[/table]
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