Pound Euro Exchange Rate Tumbles as ECB Strikes Cautiously Optimistic Tone

Pound Euro Weakens in Downbeat Trade, GBP Looks to Strong PMIs for Support

The Pound trended lower against the majority of its peers yesterday, with the Pound Euro exchange rate dipping sharply and GBP/USD falling below $1.39.

A souring market mood appeared to drive most of the losses in GBP exchange rates during yesterday’s session.

The drop in Sterling sentiment was also attributed to fears that the UK could face another wave of coronavirus infections later this year as more restrictions are eased.

Looking ahead, there’s a chance for the Pound to mount a recovery today as the UK’s latest PMI releases revealed business activity expanded at a better-than-expected pace in April after a large part of the UK economy reopened.

The PMIs revealed UK businesses grew at their fastest rate since 2013, with manufacturing and services PMIs beating forecasts at 60.7 and 60.1, respectively.

At the same time, retail sales data for March released earlier this morning unexpectedly revealed 5.4% growth, higher than the 1.5% uptick expected.

Following the publication of the upbeat data, GBP exchange rates have steadied, although the Pound Euro exchange rate continues to weaken, struggling to hold €1.15, due to strong EUR economic data released today.

Euro Buoyed by ECB Outlook and Surging Business Activity

The Euro ticked higher during yesterday’s session after the European Central Bank’s (ECB) latest forward guidance was cautiously optimistic.

ECB President Christine Lagarde spoke of an improving growth and inflation outlook, but tempered these comments by reiterating the bank’s commitment to maintaining its highly accommodative monetary policy.

In the spotlight for EUR investors today is the strengthening business activity in the Eurozone.

The bloc’s PMI data released this morning showed the private sector grew at its fastest rate since July. Manufacturing growth surged to a record high 63.3 reading and services climbed into growth territory for the first time since last August.

Consequently, EUR exchange rates are extending their gains so far today. The Euro Pound exchange rate has firmed and EUR/USD has recovered yesterday’s losses holding $1.20.

US Dollar Bolstered as Jobless Claims Continue Falling

The US Dollar strengthened on Thursday as rising safe-haven demand and another surprise drop in new US jobless claims last week bolstered USD exchange rates.

New claims fell from 586,000 to a new post-pandemic low 547,000 for the week ending 17 April, beating forecasts they would tick up to 617,000 and offering further signs that the US jobs market is well on the road to recovery.

Coming up, the publication of the latest US Markit PMI’s, while not as influential as the ISM releases, could provide another boost to the US Dollar this afternoon, assuming the US private sector continues to enjoy solid growth.

Canadian Dollar Continues to Benefit from Hawkish BoC

CAD exchange rates held steady through Thursday’s trading session, as the ‘Loonie’ continued to draw support after the Bank of Canada (BoC) struck a more hawkish tone than expected following its latest policy meeting on Wednesday.

Australian Dollar Recovery Capped by Cautious Mood

The Australian Dollar sought to stage a recovery overnight on Thursday but the risk-sensitive ‘Aussie’ found its gains capped amidst a prevailing risk-off mood.

New Zealand Dollar Tempered by Global Coronavirus Concerns

The New Zealand Dollar traded in a similar manner to the Australian Dollar overnight, with the ‘Kiwi’ only finding modest support as investors remained cautious in light of renewed coronavirus concerns.

Data Releases

07:00 GBP Retail Sales (Mar)

09:00 EUR Manufacturing PMI (Mar)

09:00 EUR Services PMI (Mar)

09:30 GBP Manufacturing PMI (Mar)

09:30 GBP Services PMI (Mar)

14:45 USD Manufacturing PMI (Mar)

14:45 USD Services PMI (Mar)

Matthew Andrews

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