Pound to Euro Exchange Rate Edges Higher After Another Week of Losses
As this week’s UK economic calendar is quieter this week, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to react to potential Brexit developments, as well as the Eurozone’s key upcoming growth figures.
Due to broad Brexit uncertainties and a sturdier Euro (EUR), the GBP/EUR exchange rate slipped from the level of 1.1187 to 1.1135 last week. GBP/EUR is now less than a cent away from the yearly low of 1.1083 seen earlier in August.
On Monday, GBP/EUR edged higher slightly as investors bought the Pound (GBP) back from its cheapest levels and concerns about recent financial issues in Turkey weighed on the Euro.
While the Eurozone’s economic outlook is relatively solid, expectations for slow monetary policy tightening and concerns about potential impacts from fallouts in neighbouring economies are weighing on the Euro.
Pound (GBP) Exchange Rates Fails to Find Major Support Despite Stronger UK Data
Despite a trio of better-than-expected UK ecostats last week, the Pound failed to capitalise and instead spent most of the week falling even further on Brexit uncertainties.
News that Britain’s unemployment rate had improved, the monthly inflation rate had printed slightly above expectations, and Britain’s July retail sales results had come in far above forecasts, only gave Sterling brief boosts in demand.
In particular, July’s UK retail sales were impressive with the monthly figure jumping from -0.5% to 0.7% and the yearly figure unexpectedly rising from 2.9% to 3.5%.
However, ultimately the combination of broad Brexit uncertainties and the resilience of the Euro left the Pound to Euro exchange rate lower throughout the week.
UK data continued to indicate that even when stats were above expectations, there were high uncertainties about the economic outlook due to a lack of clarity regarding what kind of Brexit deal the UK and EU could get.
With concerns of a potential ‘no deal’ Brexit persisting, the Pound’s potential for gains will be capped until UK and EU negotiations can give markets and businesses more certainty.
Euro (EUR) Exchange Rates Slip from Best Levels as Turkey Concerns Persist
Last week, moreso than Eurozone data, the Euro’s movement was driven by developments in a perceived Turkish currency crisis.
Warnings that a significant plummet in the Turkish Lira (TRY) could have an impact on the Eurozone economy caused some Euro weakness last week.
As the Turkish Lira (TRY) recovered later in the week the Euro strengthened too, but concerns about Turkey’s currency woes look to persist this week. Analysts, like David Madden from CMC Markets, reckon this will continue to cause uncertainty in the Eurozone:
‘The slump in the Turkish Lira is on traders’ minds as the fear of contagion into the Eurozone is likely to remain a dominant theme. It was reported that emerging market funds were already trimming their exposure to the country in July, and that was even before the severe decline in the Lira.’
Last week’s Eurozone data was decent, with solid growth stats, but investors may be hesitant to keep buying the Euro without more support, as it is already very strong versus Sterling.
Pound to Euro (GBP/EUR) Forecast: UK Borrowing Data and Eurozone Growth Figures in Focus
The first half of the week will be relatively quiet in terms of data, so as a result the Pound to Euro (GBP/EUR) exchange rate will react more to political developments, regarding Brexit or Turkey.
Tuesday will see the publication of Britain’s July public sector net borrowing stats, but these are unlikely to be particularly influential even if they impress and the focus of Sterling investment will remain on Brexit.
Any developments in UK-EU Brexit talks or the stance over Brexit within Britain’s ruling Conservative Party are likely to have more of an impact. Any optimistic Brexit developments could give the Pound a more sustained boost.
As for the Euro, the shared currency may remain under pressure if the Turkish Lira (TRY) continues to weaken again.
However, the Euro may also find support if Thursday’s Eurozone PMI projections for August impress. This data will be the best indication so far of how the Eurozone’s economy has been performing this month.
It will be followed on Friday by Germany’s final Q2 Gross Domestic Product (GDP) growth rate results, which may also influence the Pound to Euro (GBP/EUR) exchange rate if they surprise investors.
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