Weekly Currency Update: Pound Euro Exchange Rate Pushes Higher on Stronger Q4 UK GDP

GBP/EUR – Pound Benefits from Stronger Fourth Quarter GDP

An unexpected upward revision to the finalised fourth quarter UK GDP reading encouraged the Pound to recover ground this morning.

As the quarterly growth picked up from 1% to 1.3%, this represented a slightly smaller loss of momentum than initially anticipated, bolstering confidence in the economic outlook.

If the finalised March manufacturing PMI released tomorrow confirms the sharp increase seen in its initial reading, GBP exchange rates could add to Sterling’s bullish momentum.

As long as both of March’s PMIs show positive growth on the month, the risk of a first quarter economic contraction looks set to diminish, to the benefit of the Pound.

GBP/USD – Rebound in Retail Sales Boosts Pound

Although the CBI distributive trades index failed to improve in March, instead holding steady at -45, this was not enough to drag GBP exchange rates down for long.

Worries over the health of the retail sector quickly eased in response to a solid rebound seen in February’s monthly retail sales data, which jumped 2.1%.

With UK consumers showing an increased willingness to spend once again, in spite of ongoing lockdown conditions, the appeal of the Pound improved.

However, with the UK beginning the path out of lockdown, any signs of fresh Covid-19-based disruption could still weigh heavily on GBP exchange rates in the days ahead.

USD/GBP – US Dollar Looks for Boost on Payroll Data

The sharp decline seen in February’s durable goods orders figure put pressure on the US Dollar ahead of the weekend, especially as market risk appetite showed signs of picking up.

However, the US Dollar has recovered some of its losses this week as USD rose alongside US Treasury yields ahead of a speech by Joe Biden, where he is expected to announce a massive infrastructure spending plan.

Another strong monthly performance from the ISM manufacturing PMI could add support to the US Dollar towards the end of the week.

With forecasts also pointing towards a solid increase in the latest non-farm payrolls figure, a sense of renewed confidence in the health of the labour market may also help to boost the US Dollar.

EUR/USD – Resilient German Sentiment Fails to Shore up Euro

While the Germany GfK consumer confidence index picked up sharply for April, this was not enough to give the single currency any major boost against its rivals.

Although the Eurozone’s powerhouse economy continued to demonstrate signs of resilience, even in the face of fresh Covid-19 anxiety and the threat of a third wave in Europe, EUR exchange rates struggled.

However, if German retail sales show a rebound on the month in February, the Euro may gain a stronger footing.

Confirmation that the Eurozone manufacturing sector continued to outperform at the end of the first quarter could also benefit the single currency, in spite of lingering fears over the possibility of a negative quarterly growth rate.

Louisa Heath

Contact Louisa Heath


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