Widened German Trade Surplus Drags Pound Euro Exchange Rate Down
As March’s German trade balance bettered forecasts this saw the Pound to Euro (GBP/EUR) exchange rate remain on a weaker footing heading into the weekend.
While forecasts had pointed towards a narrowing of the trade surplus it instead widened from €18.2 billion to €20.5 billion, demonstrating a greater level of resilience.
With the Eurozone’s powerhouse economy experiencing greater trade strength at the end of the first quarter the appeal of the Euro (EUR) naturally improved.
This improvement was particularly driven by a sharp monthly increase in export volumes, indicating that the ongoing pandemic failed to put any fresh pressure on the German economy at this stage.
A stronger-than-expected uptick in the latest German industrial production figure also helped to boost EUR exchange rates this morning.
UK Construction PMI Miss Weighs on Pound Sterling Appeal
Support for Pound Sterling (GBP) remained muted, meanwhile, as April’s UK construction PMI failed to pick up as anticipated.
Where forecasts had projected an increase from 61.7 to 62.3 the index instead saw a slight dip to 61.6, showing a minor loss of momentum.
Although this still indicates that the UK construction sector saw strong growth at the start of the second quarter this was not enough to offer the GBP/EUR exchange rate any boost.
As the construction sector only accounts for a small fraction of the UK gross domestic product investors saw little reason to favour the Pound on the back of the data.
Solid UK House Price Growth May Encourage Pound Euro Exchange Rate Rally
A fresh rallying point could be in store for the Pound to Euro exchange rate on Monday, though, if the latest Halifax house price index proves encouraging.
Markets expect to see another solid increase in house prices on the year, pointing to the ongoing strength of the domestic housing market.
As long as house prices continue to push higher worries over the outlook of the wider economy are likely to diminish, at least in the near term.
On the other hand, if house price growth slows on the month this could leave the Pound vulnerable to a fresh bout of selling pressure.
Euro Exchange Rates Brace for Latest ZEW Economic Sentiment Survey
EUR exchange rates could look for further support on the back of May’s set of ZEW economic sentiment surveys.
If both the German and Eurozone sentiment indexes show signs of continued strength the single currency could hold onto a positive footing against its rivals.
However, any dip in sentiment could weigh heavily on demand for the Euro as confidence in the outlook of the Eurozone economy falters.
After the currency union returned to a state of technical recession in the first quarter investors are wary of any further signs of slowdown, leaving EUR exchange rates vulnerable to a fresh decline.