Continues Concerns from Businesses over Brexit Helps Euro to Pound Exchange Rate Climb
Some solid Eurozone data in recent sessions, as well as continued warnings from UK businesses over the Brexit process, have made it easier for the Euro to Pound Sterling (EUR/GBP) exchange rate to recover towards the end of the week.
After opening the week at the level of 0.8850, EUR/GBP spent most of the week trending lower and the pair hit a weekly low of 0.8800 on Wednesday.
EUR/GBP has since recovered though and on Friday the pair trended in the region of 0.8848 – just below the week’s opening levels. EUR/GBP is less than half a cent away from last Friday’s quarterly high of 0.8884.
Essentially, signs that the Eurozone economy is rebounding from a slower performance earlier in the year helped the Euro (EUR) to strengthen. Meanwhile, while UK data has had similar implications, Brexit jitters keep pressure on the Pound (GBP).
Euro (EUR) Exchange Rates Supported by Rebounds in German Data
Market fears that German businesses were being negatively impacted by US plans for trade protectionism were somewhat relieved this week, as much of the latest Eurozone data beat expectations.
While not strong enough to notably boost European Central Bank (ECB) interest rate hike bets or cause the Euro to surge, the data has been enough to bolster support for the shared currency.
Wednesday’s final June Eurozone services and composite PMIs from Markit beat projections, and this was followed on Thursday by some solid German data. German factory orders jumped to 2.6%, well above the forecast 1.1%.
Germany’s May industrial production results on Friday were similar to the factory orders data, jumping to 2.6% rather than the forecast 0.3%. The previous figure was revised lower though, from -1% to -1.3%.
Overall, the week’s data was solid enough to help an initially muted Euro to recover to nearer its best levels versus the Pound.
Pound (GBP) Exchange Rates Pressured as Brexit Jitters Persist
In the first half of the week, the Pound saw stronger demand as investors digested some better than expected UK PMI data.
The PMI data bolstered market hopes that the Bank of England (BoE) could hike UK interest rates as soon as August.
However, Brexit concerns have once again been hitting headlines and towards the end of the week investors became anxious about the deluge of warnings from businesses about how Brexit may impact them.
On Friday, Airbus CEO Tom Enders was the latest to show disappointment and concern at the lack of Brexit negotiation progress from the UK government:
‘Her Majesty’s Government still has no clue, no consensus on how to execute Brexit without severe harm … a discomforting situation for us’
Thursday’s news that JPMorgan had confirmed plans to begin moving staff out of London and to the European continent in the coming months was also a negative for Sterling.
Euro to Pound (EUR/GBP) Forecast: Trade Data and German Inflation Ahead
Next week’s UK data will be interesting, as the UK is beginning monthly Gross Domestic Product (GDP) reports.
There will also be plenty of opportunity for the Euro to Pound (EUR/GBP) exchange rate to be driven both by data and by other developments. Brexit jitters are likely to remain influential.
Amid news that the US had essentially begun a trade war with China, there are market concerns that both Eurozone and UK economies could be impacted.
However, the Euro is more likely to be influenced by trade war concerns due to Germany’s reliance on trade.
As a result, Monday’s German trade balance results from May could prove influential.
Tuesday’s session will see the publication of Britain’s May trade balance results, as well as Britain’s first monthly GDP report – from May. The May growth figures could prove highly influential to Bank of England (BoE) interest rate hike bets and Sterling.
Later in the week, Germany’s final June inflation results will be published which also have the potential to influence the Euro to Pound (EUR/GBP) exchange rate.