GBP/EUR Exchange Rate Benefits From Mixed Eurozone PMIs
UPDATE: The mixed nature of July’s Eurozone manufacturing and services PMIs has encouraged the Pound Sterling to Euro (GBP/EUR) exchange rate to trend higher.
While the Eurozone manufacturing sector demonstrated signs of growth this was balanced out by a weaker service sector and signs of falling export growth.
With the Eurozone economy starting the third quarter on a weaker footing the appeal of the Euro (EUR) has declined.
GBP/EUR Trades Nervously as BoE Policymaker Broadbent Prepares Speech and Eurozone Consumer Confidence Holds Steady
UPDATE: As the Eurozone consumer confidence index unexpectedly held steady on the month in July at -0.6 the Pound Sterling to Euro (GBP/EUR) exchange rate softened.
While sentiment remains negative, investors were still encouraged to find that the data had bettered forecasts, suggesting that the domestic outlook could improve in the months ahead.
Pound Sterling Euro (GBP/EUR) Exchange Rate Looks to Capitalise on Softening Eurozone Confidence
UPDATE: Support for the Pound Sterling to Euro (GBP/EUR) exchange rate could strengthen on Monday afternoon if the Eurozone consumer confidence index for July proves disappointing.
Markets anticipate a further deterioration in sentiment, with the index set to dip from -0.5 to -0.7.
A weakening of the confidence index is unlikely to encourage hopes that the Eurozone economy started the third quarter on a stronger footing, leaving the Euro (EUR) vulnerable to fresh losses.
Pound Sterling to Euro (GBP/EUR) Exchange Rate under Pressure after Weak UK Data
A run of weaker-than-expected UK data left the Pound Sterling to Euro (GBP/EUR) exchange rate on a downtrend for most of last week.
Disappointing inflation, wage growth and retail sales figures all undermined market confidence in the prospect of the Bank of England (BoE) tightening monetary policy at its August policy meeting.
As the odds of an imminent interest rate hike slumped from 80% to 55%, and investor confidence faltered, the mood towards Pound Sterling (GBP) turned bearish.
Even so, a stronger showing from Friday’s UK public sector net borrowing data encouraged GBP exchange rates to return to an uptrend.
Euro (EUR) Exchange Rates Soften as Anticipation Mounts for ECB Commentary
As markets brace for Thursday’s European Central Bank (ECB) policy meeting the Pound Sterling to Euro (GBP/EUR) exchange rate could find further support.
Investors do not expect to see any significant monetary policy developments at this juncture, although attention will still focus on the latest commentary from the ECB President, Mario Draghi.
Any signs of increased hawkishness could encourage investors to pile into the Euro (EUR), boosting the odds of the ECB raising interest rates again sooner rather than later.
On the other hand, if the governing council shows greater signs of dovishness the mood towards the single currency may deteriorate further.
As long as the central bank remains on track to wind down its quantitative easing programme as anticipated, the downside potential of EUR exchange rates is likely to remain limited.
Pound Sterling Euro (GBP/EUR) Exchange Rate Vulnerable to Deteriorating UK Business Confidence
With the UK Parliament preparing to break for the summer recess, the Pound Sterling to Euro (GBP/EUR) exchange rate may see a reduction in political volatility over the coming days.
Brexit-based jitters could die down a little in the near term, even though a significant degree of uncertainty continues to hang over the ultimate outcome of negotiations.
Focus will also fall on July’s CBI business optimism and sales indexes, with forecasts pointing towards a further deterioration in sentiment.
If business confidence continues to show signs of weakening markets are unlikely to see any real cause for optimism in the economic outlook, leaving GBP exchange rates biased to the downside.
Evidence that the economy remains on a shaky footing at the start of the third quarter could further erode the prospect of imminent BoE monetary tightening, to the detriment of the Pound.
Weaker Eurozone PMIs to Boost GBP/EUR Exchange Rate
The Pound Sterling to Euro (GBP/EUR) exchange rate could find an additional rallying point on the back of the latest Eurozone PMIs.
As both the Eurozone manufacturing and services PMIs are forecast to show a modest dip on the month the Euro looks vulnerable to fresh weakness.
Even if the PMIs remain firmly in expansion territory a failure to find fresh momentum is likely to drag EUR exchange rates lower on Tuesday.
With the Eurozone economy looking set to come under further pressure as a result of deteriorating global trade conditions the Euro may struggle to find support over the coming days.
As a result, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to gain ground and recover from its recent multi-month low.