EASTER GBP/EUR: 1 British Pound buys 1€1.15538 today. For live conversion and historical rates see here.
Ahead of the Easter break the Pound to Euro exchange rates ticked higher amid upbeat UK retail sales and several appalling Euro zone PMI releases.
Gains for the GBP were were kept in check however with markets bracing for next weeks return to Brexit-related price action as MPs return to parliament to continue cross-party talks.
"UK Retail Sales rose 1.1% in Mar versus forecasts of 0.3% M/M fall. Sales accelerated to +6.7% Y/Y, the strongest since late 2016. Consumers are staying calm and carrying on spending despite the Brexit uncertainty amid steady wage gains. The data is constructive but not sustainable and did little for the GBP which remained pinned back to the lower reaches of the recent range."
Next week's German Ifo Business Climate index should provide some further insight into the outlook for the bloc following this week's upbeat ZEW release but downbeat PMIs.
Ahead of the release, ING economists wrote "Against the backdrop of the Brexit 'flex-tension' and positive signals from China and trade, the German Ifo index, due next Wednesday should see a marginal improvement."
With a Bank Holiday in play, Friday's session could see thin-trading conditions keep the Pound-to-Euro range-bound.
Despite strong UK data and weak Eurozone data released on Thursday, sterling investors remain hesitant to move too much on the British Pound to Euro exchange rate.
As a result, the pair could still end the week lower as Brexit uncertainties continue to weigh on Pound Sterling's appeal, and some investors remain hopeful that the Eurozone economy could rebound soon.
Following last week’s tumble, this week’s GBP/EUR movement hasn’t been quite as bearish. While GBP/EUR has slipped from the week’s opening levels of 1.1566, it has been able to hold above the three-week-low of 1.1522 seen in the middle of the week.
Instead, GBP/EUR has rebounded slightly since yesterday and at the time of writing on Thursday was trending closer to the level of 1.1558 – just below the week’s opening levels.
Pound (GBP) Exchange Rates Benefit as UK Retail Sales Show Surprising Resilience
Brexit uncertainties have persisted since a long delay to the formal Brexit date was announced last week, and this has kept pressure on the Pound.
Amid those Brexit jitters, as well as concerns that the UK government and opposition Labour Party will be unable to reach a compromise Brexit plan, Sterling spent most of the past week trending lower.
As a result, investors were relatively impressed today as Britain’s March retail sales results printed well above expectations.
UK retail sales were forecast to slump to a contraction of -0.3% month-on-month, but instead jumped to a solid 1.1%. What’s more, the previous figure was revised higher from 0.4% to 0.6%.
The yearly figure was especially impressive, surging from 4.0% to 6.7%. Analysts at the Office for National Statistics (ONS), who compile the report, noted that this year’s warmer weather is partially responsible for the stronger consumer activity.
Vitally, the data indicated that consumers were largely unperturbed by ongoing Brexit uncertainties. This made investors more hopeful that Britain’s economy could be resilient despite months more Brexit uncertainty on the horizon.
Euro (EUR) Exchange Rates Slump as Eurozone Manufacturing Sector Remains Weak
Investors had been buying the Euro for most of the week so far, amid market hopes that the Eurozone’s economic outlook was improving and could rebound in the coming months.
However, that demand for the Euro was stopped short today, as the latest Eurozone PMI projections from Markit contained some concerning implications for the strength of Eurozone economic growth.
Not only did French and German manufacturing sectors perform even worse than expected this month, according to the projections, but the Eurozone’s overall manufacturing and services prints all came in short of expectations.
Eurozone manufacturing only edged higher to 47.8, still in the region of contraction, while services tumbled to just 52.5 rather than slipping to the expected 53.2.
As a result of the disappointing reports, the Eurozone’s overall composite PMI slowed further to 51.3. The data weighed on hopes that the Eurozone economy was rebounding from the slowdown, instead causing some concerns that the slowdown could last even longer.
According to Neil Wilson from Markets.com:
‘April is the cruellest month, full of false hope - and so it is for the ECB and Mario Draghi they look in vain for signs of a recovery in the European economy. What’s clear from today’s PMI numbers is that there are as yet no green shoots of spring for the Eurozone. Manufacturing remains on the floor, offset to a degree by a healthier services sector which is now also showing signs of malady.’
Investors were now even more concerned that the European Central Bank (ECB) could become more dovish rather than hinting towards interest rate hikes being possible any time soon.
GBP/EUR Exchange Rate Forecast: Eurozone Confidence Data Ahead
Recent Eurozone data has shown rising confidence from investors despite the weaker economic activity – but will upcoming Eurozone data continue to show this rising confidence?
Amid a lack of major UK data due for publication next week, Pound to Euro exchange rate investors are more likely to react to Eurozone confidence figures throughout the next week.
Eurozone consumer confidence projections from April will be published on Tuesday, followed by German business confidence data from Ifo on Wednesday, and German consumer confidence from GfK on Thursday.
CBI will publish some UK business optimism and factory data on Thursday as well, but unless these are highly surprising the Pound’s movement may not shift much.
Sterling volatility is lower since the Brexit process was delayed, but any surprising developments in Brexit news would still likely have an impact on the Pound to Euro exchange rate.