The Euro made positive movements against the Pound over the previous week and looks set to continue this trend over the coming week, given the economic predictions that have been made.
- EUR GBP exchange rate steadily gained last week – Rise seen from 0.84 to 0.86
- Single currency bolstered by German ecostats – More trade and growth shown than expected
- Pound in low demand over last week – Negativity all-round after rail strikes and poor UK data
- Eurozone to bring ZEW data and French unemployment – UK inflation and claims stats also out
The Pound was in an undesirable condition last week, having been damaged repeatedly by low investor sentiment and a hamstrung rail network.
Eurozone Economic News: EUR GBP Gained Last Week on German Support
The past week was a positive one on the whole for the Euro, with the common currency steadily appreciating to a high of 0.86 by Friday.
Investor optimism was mainly stoked by German economic announcements, which opened on Monday by showing a rise from -0.9% to 0.8% for industrial production in June.
This trend was followed on Tuesday, when the nation’s trade surplus for June rose from 21bn to 24.9bn, instead of falling to 20.8bn as expected.
Germany was not the only nation with good data last week, as Wednesday saw Portugal’s Q2 unemployment rate drop from 12.4% to 10.8%.
Italy became a rut in the road on Thursday, when it was revealed that the July trade surplus had narrowed and inflation had fallen in most applicable fields. This poor performance continued into Friday, when the Q2 GDP growth rate showed a staggering 0% figure for the quarterly printing.
Ultimately for the Euro, however, Germany continued to hold up the single currency at the end of the week by posting a rise from 1.5% to 3.1% for the Q2 annual GDP growth flash.
The icing on the cake came when industrial production on the month in the Eurozone climbed from -1.2% to 0.6%.
Pound Sterling Exchange Rates Highly Unfavourable on Mounting Post-Referendum Pressures for UK
Sterling was notable last week for its continued negativity against the Euro and most other peers over the five working days; this was brought about by a combination of factors including rail strikes, raised odds of another UK interest rate cut and the potential fraying of the UK-Chinese economic relationship over the proposed Hinkley Point nuclear power station.
Against the Euro, the Pound’s exchange rate fell from 1.18 to 1.15 from Monday to Friday.
Domestic data only furthered the Pound’s declining status, with June’s trade deficit expanding and the annual construction output on the month sliding from -1.6% to -2.2%.
In response to this news, Pantheon Macroeconomics economist Samuel Tombs alarmingly forecast that;
‘The downturn looks set to deepen in the third quarter. Meanwhile, ‘Brexit’ negotiations will be protracted, so businesses will hold off committing…for a long time to come. In addition, the public investment plans won’t be reviewed until the Autumn Statement…and few construction projects are genuinely ‘shovel ready’. Accordingly, we continue to think that a slump in construction activity will play a key role in pushing the overall economy into recession over the coming quarters’.
Future EUR GBP Forecast: Eurozone ZEW Positivity Predicted, UK Claims Expected to Rise
Both the Eurozone and the UK will bring high impact domestic data in the coming week, though even before the results are announced, it seems as though the Euro has a distinct advantage against the Pound.
The first major Eurozone data is due on Tuesday, when both the Eurozone and German ZEW economic sentiment indexes for August are due. Forecasts have been optimistic for the outcomes, as well as for the German ZEW current conditions outcome for the same month.
Thursday will bring the other big clump of Eurozone data, when France’s Q2 unemployment rate is due along with the Eurozone inflation rate stats for July. France is expected to see unemployment drop from 10.2% to 10.1%, while base Eurozone inflation is predicted to drop on the month but rise on the year.
The UK will also provide inflation rate stats next week, with Tuesday’s annual result for July forecast to rise from 0.5% to 0.6%. On the month, a reprint at 0.2% has been estimated.
Wednesday is the other major day for UK data, where July’s claimant count change and unemployment rate result for June are due.
UK claims are expected to rise considerably from 0.4k to 5.5k, while despite Bank of England (BoE) predictions about rising unemployment after the EU Referendum, the rate is expected to remain at 4.9% on the month.
Recent EUR, GBP Exchange Rates
The Euro Pound (EUR GBP) exchange rate has been trending in the region of 0.8635 and the Pound Euro (GBP EUR) exchange rate has been trending in the region of 1.1581 recently.
