GBP/EUR Extends Gains Despite Underwhelming UK Data
Sterling’s (GBP) rally against the Euro (EUR) unexpectedly continued throughout Wednesday despite poor unemployment data holding the Pound down.
Climbing by around 0.2%, the Pound remained relatively strong amid reports that unemployment had increased to 1.7m. The percentage of unemployed remained at 5.1% however, still healthy and down from early 2015 levels.
This state of play continued on Thursday, with the Pound remaining firm against the Euro in spite of the UK’s latest batch of retail sales data falling short of forecasts and the European Central Bank (ECB) opting to leave interest rates on hold at its latest policy meeting.
Earlier…
- UK Stocks Help Boost GBP – Sentiment towards miners and energy up
- ‘Brexit’ Fears Eased by Phone Poll – Telegraph poll suggests strengthening ‘Remain’ turnout
- EUR Mitigates Losses on ZEW Survey – Positive economic sentiment slows GBP rally
- Forecast: UK Employment Data in Focus – Jobs numbers to move GBP
The Pound Sterling to Euro (GBP/EUR) exchange rate has experienced an unexpected rally thus far this week after Chancellor George Osborne initially worried investors with his ‘Brexit’ gloom.
GBP/EUR advanced 0.3% during Tuesday’s session to hit a new 3-week-high of 1.2681, following a gain of 40 pips on Monday. At the time of writing, the pair traded around 1.2672.
Pound (GBP) Rallies on ‘Brexit’ Poll, Climbing UK Stocks
The GBP/EUR exchange rate began to move in the Pound’s favour this week, with a surprising Sterling rally taking place despite a lack of British data.
Following a report released by the Treasury on Monday describing a series of possible effects a ‘Brexit’ could have on the UK economy, The Telegraph released the results of a phone-based EU referendum poll.
The ORB poll indicated that a greater number of ‘Remain’ supporters now intended to vote in June’s referendum;
‘This turnout jump is completely down to an increase in motivation among Remain voters – where 65% (up four points since the previous track) are now likely to cast a vote. Contrastingly, there has been no change in motivation among Leave voters, with 70 per cent saying that they are definite to vote on referendum day.’
In reaction to increased hopes that Britain would continue its EU membership, anxious investors relaxed a little on their Pound positions.
Adding to the Pound’s strength is UK stock news, as reported by Bloomberg. The brief hike in oil prices caused by a Kuwaiti strike, as well as mining sectors, influenced improvements.
Weakened Euro (EUR) Stands Ground on Positive ZEW Survey
Still reeling from a series of statements from the European Central Bank (ECB), the Euro was able to find a foothold as positive news was released during yesterday’s session.
Tuesday’s Eurozone data included April’s results of the monthly ZEW survey. The headline indication of Eurozone economic sentiment printed at an 21.5, an impressive leap from March’s 10.6. Germany’s own economic sentiment also printed above forecasts of 8.0, coming in at 11.2.
The report of Germany’s current situation may have slightly weighed on the results’ optimism though, as it scored a low 47.7 despite predictions that it would rise from 50.7 to 50.8.
Economic sentiment being on the rise may inspire a little more confidence in Eurozone investors, and the Pound’s rally slowed following the survey’s release.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Unemployment Rate Expected to be Stagnant
This morning’s news is likely to influence the majority of GBP/EUR movement for the coming day. Key UK employment data is due for release shortly and if wage growth is shown to have increased in line with forecasts the Pound is likely to strengthen.
Currently, the ILO unemployment rate is tipped to remain stagnant at around 5.1%, with the jobless claimant count rate also expected to stay at 2.1%.
Potential shifts from expectation in these figures are the most likely to inspire investor movement, and if they print lower could boost the already-growing Pound sentiment, sending GBP/EUR upwards.
However, the figure likely to cause the greatest volatility is the UK’s average earnings number. A sturdy increase in average earnings would support the argument in favour of the Bank of England (BoE) looking to raise interest rates before the close of the year if Britain votes to remain in the EU.
Many investors will be interested to see if Thursday’s key European Central Bank (ECB) decision will offer any surprises, as further policymaker action is not expected by analysts until June or September.