Improved UK Consumer Confidence Fails to Boost Pound Euro Exchange Rate
An uptick in the GfK consumer confidence index was not enough to shore up the Pound to Euro (GBP/EUR) exchange rate ahead of the weekend.
While the index strengthened from -23 to -16, pointing towards a general improvement in UK consumer sentiment, this failed to offer Pound Sterling (GBP) a boost.
Although a stronger level of consumer confidence could help to shore up economic activity at the end of the first quarter investors did not take much encouragement from the data.
Focus instead fell on the latest public sector net borrowing figure, which showed a sharp increase in government borrowing during February.
Uptick in German Producer Prices Offer Euro Encouragement
Higher German producer price index figures helped to boost the appeal of the Euro (EUR), meanwhile.
With price pressures rising the German inflation rate looks set to remain on an uptrend in the near future, an improvement which could give the European Central Bank (ECB) greater cause for confidence.
As long as inflationary pressure within the Eurozone’s powerhouse economy continues to recover the case for any monetary policy loosening is likely to diminish, to the benefit of EUR exchange rates.
Fresh commentary from ECB policymakers also failed to put any particular dampener on the Euro at this stage.
Pound Vulnerable to Rising UK Unemployment Rate
Support for the Pound could falter further on Tuesday with the release of January’s UK labour market data.
Forecasts point towards the headline unemployment rate continuing to pick up at the start of the year, rising from, 5.1% to 5.2%.
As long as the labour market appears on course to remain under pressure for the duration of the first quarter the mood towards the Pound looks set to prove muted.
On the other hand, if unemployment does not rise as forecast this could encourage the Pound to Euro exchange rate to recover some of its lost ground.
Soft Eurozone Services PMIs Forecast to Drag on Euro Exchange Rates
Greater Euro volatility seems likely on the back of March’s raft of Eurozone manufacturing and services PMIs, on the other hand.
As markets expect to see another weak month of activity for the service sector the single currency could find itself coming under greater pressure in the coming week.
While the service sector is not the main driving force of the Eurozone economy another lacklustre month would still increase the risk of a negative first quarter gross domestic product reading.
However, if the corresponding manufacturing sector data delivers another strong month of growth this could help to limit the potential for any fresh EUR exchange rate losses.
Growing anxiety over the outlook of the Eurozone economy may still serve to shore up the Pound to Euro exchange rate, though.