Pound Euro Exchange Rate Weakens as UK Inflation Disappoints, Eurozone Data Impresses
A movement away from riskier currencies continues to weigh on the Pound Euro (GBP/EUR) exchange rate this week. While today’s UK PMI results impressed investors, other UK data missed the mark and the Eurozone’s PMIs were especially impressive.
Since opening last week at the interbank level of 1.16, GBP/EUR has been trending with a downside bias. GBP/EUR closed last week lower, and has continued to fall since markets opened on Monday.
At the time of writing on Wednesday, GBP/EUR is trending in the region of 1.15. The pair is attempting to climb back after touching on its worst levels in a fortnight earlier today.
If tomorrow’s UK retail sales results disappoint as well, the Pound (GBP) could be in for even more notable losses.
Pound (GBP) Exchange Rates Struggling as UK Inflation Unexpectedly Slows
After weeks of strong performance, the Pound’s movement has softened this week. The British currency is weakening against many major rivals amid signs that the UK economy may not be able to recover quite as quickly as some hoped.
Despite caution from the Bank of England (BoE), this morning’s weaker than expected UK inflation report was still a disappointment to traders. It weighed on the Pound and any hawkish BoE speculation.
According to Paul Dales, Chief UK Economist at Capital Economics:
‘The surprise fall in CPI inflation, which displays the disinflationary effect from Covid-19 lockdowns, will delay the rebound to 2.0% and perhaps prompt the markets to reconsider their view that interest rates will rise next year.’
Today’s UK PMI projections beat forecasts and helped Sterling to hold above its worst levels. Still, investors are becoming more hesitant to keep piling in on the Pound.
Euro (EUR) Exchange Rates Supported by Surprise Surge in Eurozone PMIs
The Eurozone’s March PMI projections were also printed this morning. The data was especially impressive in Germany, where services unexpectedly printed growth and manufacturing jumped to a highly impressive figure of 66.6.
It marked the first month of growth for the Eurozone in six months.
As the Eurozone’s performance was better than expected, it boosted hopes that the Eurozone’s economy has been resilient to coronavirus restrictions this month and will continue to strengthen.
Pound Euro (GBP/EUR) Exchange Rates Await Confidence and Retail Stats
With the Pound weaker on underwhelming inflation stats, the British currency could be hit even lower by the end of the week if upcoming key UK data disappoints investors.
Friday will see the publication of Britain’s February retail sales results. They have the potential to be one of the week’s most influential datasets.
If UK retail stats fall short of expectations, more of the Pound’s recent bullishness could evaporate and GBP/EUR may be in for further losses.
Of course, impressive UK retail data could boost the Pound’s appeal again instead.
Upcoming Eurozone data includes confidence data from the Eurozone, Germany and France. If the data is stronger than expected, it could make investors more optimistic in Eurozone resilience.
Developments in the UK and Eurozone coronavirus pandemic situations will continue to influence the Pound Euro (GBP/EUR) exchange rate as well.