- German and Eurozone PMIs Disappoint – Eurozone Retail contracts further
- Investors Uninspired after ECB Dovishness – Predictable tone makes Euro sluggish
- Pound Hit by Markit Warnings – Organisation warns of UK growth stagnation
- Forecast: BoE Decision Next Week – As well as Eurozone GDP
The Euro to Pound Sterling (EUR/GBP) exchange rate has largely fluctuated this week, with the Euro initially rallying but the Pound attempting to recover on Thursday due to quiet economic news and mixed data for both the Eurozone and UK.
EUR/GBP may be able to end the week above its opening levels however, as investors become more bearish on the Pound. The exchange rate is currently trading narrowly in the region of 0.7877.
Euro (EUR) Advance Slows on Poor PMI
The Eurozone’s final April PMI results were released by Markit today and were largely disappointing. While the week’s previous Eurozone PMI reports were mixed, Friday’s German Construction and Retail scores, as well as the Eurozone’s delayed Retail print, were decidedly poor.
German Construction slipped from 55.8 in March to 53.4 in April. Retail suffered further, falling from 54.1 to 51.0.
Perhaps the worst news for the shared currency however, came from the Eurozone Retail PMI score. After printing a disappointing contraction of 49.2 in March, April saw an even worse contraction of 47.9.
This comes after Thursday’s latest European Central Bank (ECB) economic bulletin revealed little that investors did not already know, leaving Euro trade uninspired.
The ECB reminded markets that easing measures were largely on track and that the bank was prepared to use further policy tools in order to achieve the Eurozone’s 2.0% interest goal.
Markit Chief Issues Economic Warning after Britain’s Poor PMI Hat-Trick
A complete set of worse-than-expected PMI results for the UK this week has reminded markets of the potential impact a ‘Brexit’ could have on the economy, with Markit’s reports suggesting that uncertainty over the UK economy going forward has contributed to poor business confidence.
Services, Britain’s most vital economic sector, dropped from 53.7, past the forecast 53.5, to a low of 52.3.
The overall Composite score indicated a considerable slowing in the overall economy when it printed at 51.9, well below the estimated drop from 53.6 to 53.2.
Markit Chief Economist Chris Williamson warned of near-stagnating growth in Britain, with analysts fearing that Q2’s GDP could be considerably worse than Q1’s as a result.
‘Uncertainty about the EU referendum caused customers to hold back on purchases, exacerbating already-weak demand … the deterioration in April pushes the surveys into territory which has in the past seen the BoE start to worry about the need to revive growth.’
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast: BoE Decision, Eurozone GDP Next Week
EUR/GBP remains soft as markets draw to a close for the week, although the Euro has gained marginally on the Pound over the course of the week.
Next week’s economic calendar is slightly more bustling for the Eurozone and the UK, beginning with German factory orders and Eurozone Sentix investor confidence reports on Monday, followed by German industrial production and an update on German trade surplus on Tuesday.
Britain’s economic calendar kicks off with an update on the UK trade deficit on Tuesday, followed by industrial and manufacturing production scores on Wednesday. The Bank of England (BoE) is due to make its May rate decision on Thursday and is widely expected to leave rates frozen once more.
Lastly, the Euro will certainly be driven by German and Eurozone Gross Domestic Product (GDP) results due next Friday.
At the time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7877, while the Pound Sterling to Euro (GBP/EUR) exchange rate traded at around 1.2695.
