Eurozone Construction Decline Fuels Pound Euro (GBP/EUR) Exchange Rate Recovery
An unexpectedly contraction in Eurozone construction output helped the Pound Sterling to Euro (GBP/EUR) exchange rate to recover some ground ahead of the weekend.
As output dipped -1.5% on the month in February, even before the Covid-19 lockdown came into effect, this cast fresh doubt over the strength of the economic outlook.
The mood towards the Euro (EUR) also soured in response to March’s Eurozone car registration data, which showed a major deterioration as the car market ground to a near-halt.
All in all, investors saw little reason to favour the single currency ahead of the weekend as the global pandemic looks set to drag on the Eurozone economy for some months yet to come.
Bank of England Caution Casts Shadow over UK Outlook
With the Bank of England (BoE) adopting a cautious view on the UK outlook, however, support for Pound Sterling (GBP) also proved limited.
As forecasts point towards the UK economy falling into a sharp recession in the second quarter the GBP/EUR exchange rate struggled to gain any significant momentum.
While the government still lacks an apparent exit plan from the current Covid-19 lockdown the Pound may remain under a degree of pressure.
Until an end to the lockdown comes into sight worries over the health of the economy are likely to linger, to the continued detriment of GBP exchange rates.
Widened Eurozone Trade Surplus Forecast to Benefit Euro
Demand for the Euro could pick up on Monday, though, if February’s Eurozone trade data improves as forecast.
A widening of the trade surplus would go some way towards easing anxiety over the resilience of the currency union, even though trade looks set to slump in the months to come.
If the Eurozone trade surplus swelled in February this would go some way towards offsetting the impact of a weaker March figure, putting the currency union in a stronger fiscal position.
On the other hand, another negative set of German producer price index figures could put a fresh dampener on EUR exchange rates.
As long as inflationary pressure within the Eurozone’s powerhouse economy looks set to weaken the potential for any single currency gains is likely to prove muted.
Sharp Rise in UK Claimant Counts Set to Weigh on GBP Exchange Rates
Further volatility may be in store for the GBP/EUR exchange rate on Tuesday, meanwhile, as markets await the release of March’s UK claimant count change.
A sharp increase in jobless claims would offer fresh evidence of the significant negative impact that Covid-19 has already had on the labour market.
Rising joblessness would limit the potential for a rapid economic recovery, given that strong levels of consumer spending have previously served to drive up growth for the UK economy.
If February’s average weekly earnings figures show a deterioration on the month this could also drag down the GBP/EUR exchange rate, with wage growth looking set to soften for the foreseeable future.