Weaker CBI Industrial Trends Orders Index Weighs on Pound Euro Exchange Rate
The Pound to Euro (GBP/EUR) exchange rate remained on the back foot this morning thanks to a surprise decline in April’s CBI industrial trends orders index.
While forecasts had pointed towards the index climbing to 2, returning to positive territory for the first time in over a year, it instead dropped to -8.
This weaker reading suggests that the economy did not start the second quarter on the strong footing that investors had previously hoped, leaving Pound Sterling (GBP) vulnerable to selling pressure.
Even though the second quarter CBI business optimism index proved more encouraging in nature, leaping to 38, this was not enough to keep GBP exchange rates from shedding fresh ground.
EUR Exchange Rate Momentum Limited Ahead of ECB Policy Announcement
Even so, the relative strength of the Euro (EUR) proved limited meanwhile as markets continued to brace for the European Central Bank (ECB) policy announcement.
Although no change in monetary policy looks likely in the coming months the potential for fresh dovish commentary has weighed heavily on the single currency.
As long as policymakers express a degree of caution over the outlook of the Eurozone economy the appeal of the Euro looks set to weaken further.
On the other hand, if the ECB takes a less dovish note than markets expect this could help to shore up EUR exchange rates across the board.
Signs that the central bank has no plans to loosen monetary policy further in the coming months may give the Euro a solid boost.
Strong UK Retail Sales Data Forecast to Shore up Pound Demand
The mood towards the Pound could see improvement ahead of the weekend, though, if March’s UK retail sales data proves encouraging.
Signs of retail spending continuing to grow, even before the recent easing in national lockdown conditions, may bolster confidence in the economic outlook.
If the retail sector can demonstrate greater resilience in the face of the ongoing Covid-19-based disruption worries over the health of the UK economy are likely to diminish in the near term.
A stronger retail sector could help to shore up the first quarter gross domestic product, diminishing the risk of a potentially negative reading.
Euro Volatility Forecast on Eurozone Manufacturing and Services PMIs
April’s set of flash Eurozone manufacturing and services PMIs may offer the Euro cause for confidence, on the other hand.
As long as the manufacturing PMI continues to deliver evidence of strong growth across the currency union the downside potential of EUR exchange rates is likely to diminish.
However, the Euro could still come under pressure if the corresponding services sector data fails to impress.
If the service sector remains trapped in a state of contraction, reflecting the impact of ongoing social restrictions, the Pound to Euro exchange rate could find a rallying point on Friday.