Pound to Euro Exchange Rate Rebounds from Worst Levels as UK Growth Beats Projections
Ahead of the publication of this week’s most notable UK data, the Pound Sterling to Euro (GBP/EUR) exchange rate was edging away from its worst levels all week.
Since opening this week at the level of 1.1375, GBP/EUR has been trending lower, seeing sharper losses towards the end of the week as Euro (EUR) trade picked up and Brexit jitters weighed more heavily on Sterling (GBP).
On Friday morning, GBP/EUR touched on a low of 1.1254 – the pair’s worst level all quarter, since March 2018. The pair edged away from its lows as investors awaited Britain’s latest growth results.
The GBP/EUR rebounded even higher following the publication of Britain’s final Q1 growth rate, which came in at 0.2% quarter-on-quarter rather than the predicted 0.1%.
Meanwhile, the Euro was supported by news that a tentative migration deal had been reached at the EU summit, bolstering hopes about stability among EU leaders.
Pound (GBP) Exchange Rates Tumbles on Brexit Worries
For most of the week, the Pound was tumbling as, despite hopes that the Bank of England (BoE) could hike UK interest rates in the coming months, any economic optimism was weighed down by Brexit uncertainties.
Businesses and economists have become increasingly anxious that the UK and EU have made little progress in Brexit negotiations in recent months, despite the Brexit date still being set for March 2019.
As businesses urged UK and EU governments to do more to protect them this week, the Bank of England has also expressed concerns about how little is being done for businesses and the financial sector.
The BoE has noted in the past that Brexit uncertainties remain a big downside risk and could potentially delay the bank’s monetary policy path if they aren’t smoothly resolved.
This has made investors hesitant to bet on BoE rate hikes this week and has kept Sterling under pressure for most of the week.
Euro (EUR) Exchange Rates Supported by EU Migration Deal
This week, some surprisingly solid Eurozone confidence stats, as well as the confirmation that a key deal on EU migration had been reached, supported Euro trade.
On Friday, investors bought the Euro following news that the deadlock on EU migration talks had finally been broken following a 10-hour session at this week’s EU summit.
The deal indicated that more EU nations would help take in migrants rescued from the Mediterranean Sea.
While details on the migration deal are still slim, EU leaders were satisfied with the deal including German Chancellor Angela Merkel and Italian Prime Minister Giuseppe Conte.
There was initially concern that Italy’s new populist coalition government would veto the deal, causing more issues for leaders.
The Euro’s strength was limited slightly though, as Friday’s German retail sales stats from May printed unexpectedly deep contractions in both monthly and yearly results.
Pound to Euro (GBP/EUR) Forecast: Key PMI Data and Eurozone Retail Sales Ahead
While the Euro has been supported by some confidence stats and the EU migration deal this week, there were still some signs of weakness in Eurozone data that are likely to limit the shared currency’s strength.
As Germany’s May retail sales results were highly disappointing, investors will be hoping for better results from France and the overall Eurozone’s retail sales figures – which will be published on Tuesday.
If they fall short of expectations, the Euro could weaken as investors become more anxious about reduced consumer activity.
As well as retail stats, Markit’s final June PMI reports will be published next week. Both UK and Eurozone reports will be published.
Markit’s manufacturing results will come in on Monday, with UK construction PMI data on Tuesday and finally the services and composite prints on Wednesday.
As services make up a significant portion of Britain’s economic activity, Wednesday’s UK services PMI could have a big impact on the Pound to Euro (GBP/EUR) exchange rate next week.
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