EUR/GBP Falls to New Low, Pound Rallies
- German Q1 GDP Prints as Expected – Euro boosted slightly by German growth
- Preliminary May Eurozone PMI Mixed – German results positive, Eurozone results poor
- New ‘Brexit’ Polls Show Strengthening ‘Remain’ Lead– Polls continue to bolster Pound
- Forecast: German Data Fails to Support Euro – Pound romps higher
The Euro to Pound Sterling (EUR/GBP) exchange rate failed to derive much benefit from a series of better-than-forecast German reports as the Pound was bolstered by the latest Brexit related news.
The latest batch of EU referendum polls have indicated that the UK is unlikely to vote for to exit the European Union in June.
Consequently, the Pound is recovering losses recorded earlier this year, with the EUR/GBP exchange rate accordingly falling to a low of 0.7563
The Euro could recover against the Pound on Thursday though if the UK’s GDP report provides cause for concern.
(Previously updated 10:30 am 25/05/2016)
Euro Struggles Vs Bullish Pound Sterling
The Euro to Pound Sterling exchange rate continued to trail downward throughout Tuesday after its plummet in the morning.
Sterling also maintained its strength despite heated debates between the Bank of England (BoE) and Treasury Select Committee (TSC) in Parliament.
BoE Governor Mark Carney defended his warnings of the risks of a ‘Brexit’ after being criticised that he was biased towards the ‘Remain’ campaign.
Carney claimed that the BoE remained to be politically neutral, but had a responsibility to British citizens to make them aware of potential economic risks. This boosted Sterling sentiment as according to The Independent, undecided referendum voters trusted the BoE more than politicians.
By Wednesday the Pound had climbed higher still, pushing the Euro to a new low of 0.7614.
Warnings from the European Central Bank regarding financial turbulence weighed on Euro demand despite German confidence data showing improvement.
The slight improvement in the German GfK Consumer Confidence gauge was followed by impressive increases in the IFO Business Climate, Current Assessment and Expectations indexes.
GfK analysts noted; ‘private consumption will remain an important pillar of the German economy over the next few months. GfK therefore still stands by the forecast it made at the start of the year that real private consumer spending will climb by around 2% in 2016. This figure stood at 1.9% in 2015.’
Ecostats for the Eurozone are in short supply on Thursday so the UK’s first quarter growth data is likely to be the main cause of EUR/GBP exchange rate movement.
Any deviation from the 0.4% quarterly forecast and expected 2.1% rate of annual expansion may have a negative impact on the Pound.
Earlier…
(Published 11:32 24.05.2016)
The Euro to Pound Sterling (EUR/GBP) exchange rate traded largely flatly on Monday after the Pound was unable to sustain a gain on the Eurozone’s mixed PMI reports. However, the pair plummeted on Tuesday morning due to new ‘Brexit’ polls.
With just a month until the EU referendum, the Pound remains sturdy. Previously trading near the week’s opening levels of 0.7735, EUR/GBP is currently down around -1.0% and trends in the region of 0.7665. For reference, last week’s three-month-low was 0.7651.
German GDP Keeps Euro (EUR) Steady, but Common Currency Fails to Hold Back Pound
The Euro held its ground during Monday’s session despite mixed PMI results leaving the shared currency largely uninspired.
The Eurozone’s preliminary May PMI results all came in lower-than-expected. Manufacturing dropped from 51.7 to 51.5, despite expectations of improving to 51.9. Services held at 53.1 rather than rising to 53.2. The overall Composite score showed a disappointing drop from 53.0 to 52.9, letting down the expectation of a gain to 53.2.
German PMI, however, printed optimistically. Manufacturing improved from 51.8 to 52.4. Services improved to 55.2 despite expectations of holding steady at 54.5. Composite PMI printed an impressive 54.7, advancing from 53.6 and past the expected 53.9.
Eurozone consumer confidence also scored better-than-expected, narrowing from -9.3 to -7.0.
While not as vital, Tuesday’s data boosted the Euro slightly as Germany’s final Q1 Gross Domestic Product (GDP) came in as expected – 0.7% quarter-on-quarter and 1.6% year-on-year. Unfortunately, the shared currency may have been slightly dented by comments that the GDP was boosted by strong investment that was unlikely to last.
Meanwhile, German ZEW surveys were mixed, with the current situation print improving from 47.7 to 53.1 and economic sentiment plummeting from 11.2 to 6.4. ZEW’s Eurozone economic sentiment print slipped from 21.5 to 16.8, well below the forecast 26.16.
Pound (GBP) Bullish Once More as ‘Brexit’ Bets Continue to Drop
The Pound was unable to sustain any gains on Monday despite mixed Eurozone data as investors readjusted their positions after Friday’s profit-taking session.
With just a month to go until Britain’s EU referendum, the Pound experienced considerable volatility and investors feared that ‘Brexit’ debates could still heat up in the ‘Leave’ campaign’s favour, which would imply an uncertain future for the Pound and UK trade.
Tuesday’s data was also poor, as PSNCR’s public finances report worsened from 17.8b to -2.4b, while public sector net borrowing showed a disappointing increase of 6.1b to 6.6b, letting down forecasts of narrowing to 5.8b.
However, Sterling began to rally on Tuesday after a new Telegraph poll revealed a further strengthening lead for the ‘Remain’ campaign.
‘The poll finds that men, Tory voters and over-65s are increasingly turning to the pro-EU campaign after previously supporting a Brexit in much larger numbers.
It is understood that the figures in the poll for the Telegraph reflect the private polling being done by Downing Street ahead of the June 23 vote.
In March, the polling found that 60 per cent of Conservatives were intending to vote Leave compared to 34 per cent for Remain.
Tuesday’s poll finds that among Tory voters, 57 per cent now say they will vote to stay in the EU, compared to 40 per cent backing Leave.’
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast: Slew of German Data Due Tomorrow
The Euro remains relatively weak as mixed data continued to hit it on Tuesday, but will Wednesday’s session imbue it with strength?
Wednesday sees the release of GfK’s German consumer confidence survey, followed by German business climate, current assessment and expectations scores from IFO.
For the time being, it’s more likely that the Pound will continue to take point in EUR/GBP movements, with ‘Brexit’ bets taking an even stronger focus with a month until the Referendum vote.
Sterling has the potential to be weakened however, as a result of talks between Bank of England (BoE) and the Treasury Select Committee (TSC) take place throughout Tuesday morning.
Dovish tones from the economic giants could well weigh on Sterling’s current bullishness, but markets could also resist the falls and instead focus on ‘Brexit’ debates as they had done already when they largely ignored Tuesday’s net borrowing report.
The Euro to Pound Sterling (EUR/GBP) exchange rate trends in the region of 0.7665, while the Pound Sterling to Euro (GBP/EUR) exchange rate trades at around 1.3046.