UPDATE
As Thursday’s European session progressed the Euro strengthened thanks to a combination of US Dollar weakness and positive sentiment following the Eurozone Retail Sales figures.
The Euro to Pound Sterling (EUR/GBP) exchange rate advanced by around 0.2%, whilst the Euro to US Dollar (EUR/USD) exchange rate rallied by around 0.8%.
Earlier…
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Trend within a Limited Range despite Weaker-than-Expected UK Services Growth
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending within a tight range on Thursday morning.
Despite European ecostats producing mostly positive results today the single currency is trending statically versus both the Pound and the US Dollar. This is likely to be the result of ongoing speculation that the European Central Bank (ECB) will ease policy this month.
Analysts at the National Bank of Canada (NBC) not only believe that the ECB will cut the overnight cash rate into negative territory, but also expand asset purchases.
One particularly positive data result today was Eurozone Retail Sales which advanced by 2.0% in January on the year, bettering the median market forecast 1.3% sales growth.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7725.
Although British economic data failed to impress today, with the Services PMI falling short of expected growth, Pound Sterling avoided depreciation. This is largely the result of corrective trading as investors fear that the recent sharp GBP downtrend was overdone.
February’s UK Services PMI was predicted to slow from 55.6 to 55.1, but the result showed output actually dropped to 52.8.
Chris Williamson, Chief Economist at Markit, said; ‘The slowdown in February leaves the PMI surveys suggesting that economic growth could weaken to 0.3% in the first quarter, but there are downside risks to even this modest expansion. Despite rising slightly from January’s three-year low, business confidence in the service sector remained at a level which has historically presaged an imminent slowing in the economy to near stagnation or worse in coming months.’
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Hold Steady ahead of ISM Non-Manufacturing/Services Composite
The Euro to US Dollar (EUR/USD) exchange rate was trending within a narrow range on Thursday morning.
In response to the Eurozone Retail Sales data, Paul Hannon of Market Watch stated: ‘Eurozone retail sales rose more strongly than expected in January, and for the third straight month, an indication that consumers benefiting from lower energy prices and falling unemployment have continued to provide some support for the currency area’s modest economic recovery.
‘Separately, surveys of purchasing managers indicated that economic activity slowed less sharply than first estimated in February, although businesses cut their prices more sharply than in previous months.’
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.0878.
As traders await the ISM Non-Manufacturing/Services Composite, the US Dollar is trending statically versus many of its currency rivals. February saw the US Dollar decline for the first time in four-months which is predominantly a response to speculation that the Federal Reserve will look to avoid tightening monetary policy for some time to come.
A recent speech from William Dudley, the president of the Federal Reserve Bank of New York, helped fuel negative sentiment as he stated that the domestic growth and inflation outlook is tilted to the downside.
‘These developments merit close scrutiny, as past experience shows that it is difficult to push inflation back up to the central bank’s objective if inflation expectations fall meaningfully below that objective.’
Euro (EUR) Exchange Rate Forecast: German Construction PMI to Provoke Volatility
There will be several domestic data publications on Friday with the potential to cause Euro changes. However, it should be noted that volatility may be initiated this afternoon upon the publication of the US Non-Manufacturing/Services Composite report.
Friday’s German Construction PMI will be in focus as the sector has enjoyed robust growth of late. The German and Eurozone Retail PMI’s will also be of interest to those trading with the common currency.
British data will be thin-on-the-ground tomorrow, but US labour market data is likely to impact the currency market as a whole.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending within the range of 0.7703 to 0.7745.
The Euro to US Dollar (EUR/USD) exchange rate was trending within the range of 1.0851 to 1.0882 during Thursday’s European session.
