While this week’s Eurozone data was fairly mixed and the week’s UK data was generally better than analysts expected, the Euro to British Pound (EUR/GBP) exchange rate may be on track to register its third consecutive week of gains. However, it’s also still possible for the Euro to weaken depending on Friday news.
Due to some mixed Euro movement and Sterling finding some support though, EUR/GBP has seen tight movement this week and has fluctuated between lows of 0.8902 and highs of 0.8955. At the time of writing on Friday, EUR/GBP trended in the region of 0.8950, but not significantly higher than the week’s opening level of 0.8938.
EUR Steadies as Turkey’s Currency Concerns Lighten and Eurozone Trade Jitters Abate
Investors have found the Euro more appealing since the middle of the week, as concerns about a perceived currency crisis in Turkey faded slightly.
The biggest story this week has been concern that Turkey could see a full blown crisis over its Turkish Lira (TRY). The currency saw broad-based sharp selloffs due to concerns about Turkey’s economy and escalating geopolitical tensions between Turkey and the US.
This had impacted the Euro due to warnings from the European Central Bank (ECB) about the possibility of the Lira having an impact on the health of Eurozone banks.
However, the Turkish government’s attempts at soothing market panic began to pay off towards the second half of the week and the Turkish Lira (TRY) began to climb again. This also made the Euro more appealing again.
As the Euro’s Turkish concerns lightened and the shared currency was able to more easily advance, the latest Eurozone trade data gave it a further boost.
The Eurozone’s June trade surplus was slightly stronger than expected, which eased market concerns that the Eurozone economy was being affected by US trade protectionism.
Then on Friday, the Eurozone’s June current account data similarly beat expectations. Overall, investors have become more hopeful that the Eurozone will weather US trade protectionism or potential trade clashes between the US and China.
GBP Fails to Register Gains Despite Jump in UK Retail Sales
This week’s UK data was generally optimistic, with many notable prints including the key unemployment rate and the monthly inflation rate beating forecasts.
However, the most impressive report of the week was Thursday’s July retail sales report, which beat expectations in all major prints.
The month-on-month retail sales figure was forecast to bounce back from -0.5% to 0.2% but instead jumped to 0.7%. Meanwhile, the yearly figure jumped from 2.9% to 3.5% rather than the expected 3.0%.
Despite all this though, Brexit jitters and especially market fear of a possible ‘no deal’ Brexit becoming reality continued to weigh heavily on Sterling.
Uncertainty about how the Brexit process will conclude has dented business and consumer activity, and analysts expect activity will only dampen further as time goes by without any stronger clarity on Brexit.
EUR/GBP Forecast: Eurozone PMI and Growth Figures in Focus Next Week
While the Euro to Pound exchange rate could still end the week lower as investors digest Friday’s Eurozone Consumer Price Index (CPI) inflation rate data, the Euro is likely to continue to drive EUR/GBP movement next week too.
Amid a quieter UK economic calendar, notable Eurozone stats are more likely to prove influential.
The first half of the week will be relatively quiet, with the only notable datasets being Eurozone construction and UK public sector net borrowing stats due on Monday and Tuesday respectively.
These aside, EUR/GBP is likely to spend the first half of the week influenced by US trade protectionism and potential developments in Turkey, which may continue to drive the Euro, as well as Brexit news that could impact the Pound.
Perhaps the week’s most notable Eurozone data will be published on Thursday, in the form of the Eurozone’s August PMI projections from Markit.
French, German and Eurozone PMI projections will be published and will give investors a better idea of how the Eurozone’s economy has been performing this month.
More solid growth data will be published on Friday, in the form of Germany’s final Q2 Gross Domestic Product (GDP) results.
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TAGS: Euro Pound Forecasts