First UK Budget Surplus in 16 Years Keeps GBP/EUR Exchange Rate Above Water
The Pound (GBP) has continued to trade in a narrow range against the Euro (EUR) today, on a relatively quiet period of data releases.
To that end, Pound traders have instead been referring back to Tuesday’s UK budget data to keep spirits up and the Pound steady.
On 24th April, it was reported that the UK had achieved its first budget surplus in 16 years, an accomplishment that has been received positively.
Economists were quick to point out that a spending spree was unlikely, but the news has still been positive enough to keep the Pound in demand.
Concerns about UK GDP Data and Brexit Leave GBP/EUR Exchange Rate Close
The Pound (GBP) has been static against the Euro (EUR) so far today, as traders consider the likelihood of slower UK GDP being announced on Friday.
The GDP estimates for Q1 2018 are tipped to show a quarter-on-quarter slowdown, from 0.4% to 0.3%.
While minimal, a dip in national economic growth could still panic GBP traders and lead to a Pound to Euro exchange rate decline.
The situation hasn’t been helped by the equally cautious prediction for Q1 year-on-year GDP growth, which isn’t expected to shift from 1.4%.
The issue of sluggish UK growth in 2018 has been on investors’ minds recently, as they contemplate the effects of low confidence and the ongoing Brexit saga.
Could Commons Revolt over Customs Union Prevents GBP/EUR Exchange Rate Advance?
Another factor limiting today’s Pound to Euro (GBP/EUR) exchange rate movement has been uncertainty about an upcoming House of Commons debate on the UK after Brexit.
MPs will meet on Thursday to discuss and vote on whether the UK should remain part of the EU customs union after Brexit. Notably, the vote will be non-binding.
The government line is that the UK will leave any and all customs arrangements after Brexit, so it is unclear what the response will be if a majority of MPs back continued membership.
At the very least, the vote could expose deep divisions between and within parties in the Commons, a possibility that has generated considerable uncertainty among Pound (GBP) traders.
Euro to Pound Exchange Rate (EUR/GBP) Steady after Slump in German Business Confidence
On the other side of the pairing, the Euro to Pound (EUR/GBP) exchange rate has similarly remained flat due to underlying tensions among Euro (EUR) traders.
In this instance, reports that German business confidence plummeted over March and April have significantly unsettled traders and worsened Euro exchange rates.
The Ifo survey scores measuring economic expectations, perceptions of current conditions and the business climate in April all fell below forecast levels.
Additionally, March’s readings saw a significant downgrade, prompting Ifo President Clemens Fuest to warn:
‘High spirits among German businesses have evaporated. The German economy is slowing down.’
Pound to Euro Exchange Rate Forecast: Will UK GDP Stats and BoE Speeches Trigger GBP/EUR Decline?
The next UK economic data to watch out for will come on Friday – with the main announcements being GDP estimates for Q1 and a pair of speeches from Bank of England (BoE) officials.
As mentioned above, the UK GDP growth results could weaken the Pound (GBP), in the event that they show a slowdown.
The BoE speeches could cause GBP/EUR volatility if Governor Mark Carney and fellow official Andy Haldane discuss UK monetary policy.
Thursday will see central bank news from the Eurozone as well, with the European Central Bank (ECB) holding a meeting on monetary policy.
ECB policymakers aren’t expected to adjust the interest rate from 0%, but the Euro (EUR) could rise against the Pound if ECB President Mario Draghi hints at any future rate hikes.