GBP/EUR Traders Anticipate Eurozone GDP Growth Figures
UPDATE 9:21 BST: Traders are awaiting the Eurozone’s latest growth figures this morning, with analysts currently expecting quarterly growth for Q1 to hold steady at 0.4%, and annualised growth to come in at 1.4%.
With a recent run of mixed data, however, an unexpected fall back in GDP growth would likely severely dent the Euro (EUR).
The GDP figures will be released at 10:00 BST.
Some European Governments are Advising Against Buying British goods ahead of Brexit as GBP/EUR Exchange Rate Takes a Knock over Fears for Car Industry
UPDATE: 15:28 BST: The Pound (GBP) has continued to slide against the Euro (EUR) this afternoon as reports have emerged that some European governments are advising businesses to avoid buying British parts for machinery in the run-up to Brexit.
The Dutch government told its exporters that under ‘rules of origin’ trade rules there is a danger of them losing business if a large part of their products contained British parts. To comply, a product must contain at least 55% parts made within the EU.
If other governments copy this advice it could have catastrophic effects for the UK’s car parts industry. Partially as a result of this, GBP/EUR is now down 0.3% on the day.
Pound to Euro Exchange Rate Tumbles as Investors Digest ECB Economist Peter Praet’s Quantitative Easing (QE) Taper Comments
UPDATE 14:17 BST: The Pound Sterling to Euro (GBP/EUR) exchange rate continued to trend lower on Wednesday afternoon as investors continued to perceive European Central Bank (ECB) official comments as hawkish.
ECB Chief Economist, Peter Praet, stated in the morning that the bank would soon discuss winding down its quantitative easing (QE) scheme.
While investors had already widely expected QE to be tightened later in the year, Praet’s comments were also seen as a signal that the ECB’s outlook had not been negatively impacted by Italian political developments.
Pound to Euro (GBP/EUR) Exchange Rate Slips on European Central Bank (ECB) Bond Buying Tapering Speculation
While Britain’s latest services data helped the Pound Sterling to Euro (GBP/EUR) exchange rate to recover most of its weekly losses, the Euro (EUR) still kept pressure on the pair on Wednesday. Furthermore, European Central Bank (ECB) speculation made the shared currency more appealing.
Eurozone political uncertainties made it easy for a weakened Pound (GBP) to advance last week, but GBP/EUR remained in the interbank rate region of €1.14.
On Monday, the Euro strengthened and briefly caused GBP/EUR to hit a low of €1.13, but the pair recovered. While GBP/EUR is currently trending below the week’s opening levels, it remains within the interbank region of €1.14.
Recent Eurozone data has been mixed, but the Euro has benefitted from fading political jitters and now the latest European Central Bank (ECB) speculation.
Comments made by ECB Chief Economist Peter Praet on Wednesday morning were perceived as hawkish, keeping GBP/EUR below the week’s opening levels.
Pound (GBP) Exchange Rate Strength Limited as UK Growth Concerns Persist
Despite a hat trick of better-than-expected UK PMI reports from May, the Pound’s (GBP) strength remains limited as investors are uncertain British growth will continue to improve later in the year.
While the rebound in UK activity following a poor Q1 has been stronger than forecast, analysts remained concerned about Britain’s overall growth outlook, due to signs of weaker business investment and Brexit uncertainties.
According to Chris Williamson, Chief Economist as Markit:
‘Disappointing inflows of new work suggest that growth could wane in coming months as Brexit-related uncertainty continues to weigh on spending decisions and dampen business confidence. Measured across all major parts of the economy, new orders growth in the second quarter so far is running at the weakest since the third quarter of 2016.’
As a result of the uncertain outlook, the Pound has been unable to recover all of its losses or sustain its recovery attempts.
Euro (EUR) Exchange Rates Climb on European Central Bank (ECB) Speculation
Despite highly mixed Eurozone ecostats indicating that the bloc’s growth continues to slow from last year’s strong performance, demand for the Euro (EUR) has been stronger so far this week.
The shared currency has largely been supported by investors returning to it, as Italian political jitters have lightened following a market panic last week.
However, on Wednesday investors opted to buy the Euro in response to comments made by the European Central Bank’s (ECB) Chief Economist, Peter Praet.
Praet noted that the central bank will likely discuss the conclusion of its bond purchases programme during next week’s policy decision.
He also said that the ECB was becoming increasingly confident that Eurozone inflation was heading back towards targets.
The comments did not represent a significant change in tone from the bank, but reminded investors that tapering of the bank’s quantitative easing (QE) is likely to happen later in the year. This helped the Euro to hold its ground.
Pound to Euro (GBP/EUR) Forecast: Eurozone Growth Projections in Focus
The Pound to Euro (GBP/EUR) exchange rate is currently on track to see losses this week, but the exchange rate could still recover if upcoming Eurozone data disappoints traders.
Thursday will see the publication of the Eurozone’s third Q1 2018 Gross Domestic Product (GDP) projections. The figures are expected to have slipped from 0.7% to 0.4% quarter-on-quarter and from 2.8% to 2.5% year-on-year.
If Eurozone growth is projected to have slowed even more than expected, investors will become anxious about how sharply growth has fallen from last year’s strong performance. This would leave the Euro weaker and make it easier for GBP/EUR to climb.
Of course, stronger-than-expected Eurozone growth results would make the Euro more appealing and would make markets more optimistic about the Eurozone’s 2018 growth.
Friday’s German trade balance and industrial production results could influence Euro trade too, but Britain’s economic calendar is looking a little quiet until next week.
UK unemployment and inflation figures will be published next week, but until then the Euro and Brexit developments are most likely to be the things influencing the Pound to Euro (GBP/EUR) exchange rate.