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GBP/EUR Recovers Ground Despite Positive Eurozone Data

Yesterday’s high: €1.1097

Yesterday’s low: €1.1057

Global Tensions Leave Euro on Softer Footing

Although Italian industrial production showed an unexpectedly strong uptick of 5.3% in June, this was not enough to boost the Euro on Wednesday.0

While this latest sign of strength from the Italian economy was welcome investors were more concerned by mounting geopolitical tensions.

As the war of words between the US and North Korea intensified sharply overnight, markets were naturally spooked.

The threat of an armed conflict between the two states encouraged investors to pile into safe-haven assets in order to minimise risk, putting the Euro under pressure as the US Dollar strengthened.

This helped to shore up the GBP/EUR exchange rate even in the absence of any major UK data releases.

Even though worries over Brexit and the threat of an acrimonious divorce from the EU remained, the Pound was still able to regain some ground yesterday.

Given that Brexit remains a longer term risk event Sterling was considered a more attractive asset than many of its rivals.

The Bank of England’s (BoE) August Agent’s summary of business conditions failed to particularly weigh on GBP exchange rates, despite making note of weakening consumer spending growth and sluggish wages.

Euro Outlook: Falling Greek Unemployment Rate Could Boost Demand

Some support for the Euro could materialise on the back of the latest Greek unemployment report, providing that the labour market shows signs of tightening.

Any indications that the Hellenic republic is continuing its recovering could weigh on the GBP/EUR exchange rate.

Even so, as the matter of debt relief between Greece and its creditors remains unresolved, a strong showing here may not encourage a significant Euro rally.

The GBP/EUR exchange rate could find some support, meanwhile, with the release of the latest raft of UK trade and production data.

Forecasts point towards a modest rebound in output after a disappointing May, which would signal continued resilience within the UK economy.

However, any widening of the trade deficit or further contraction in production could dent the Pound as hopes of the BoE returning to a tightening bias in the near future continue to diminish.

Key Events

10th August

09:30 UK Industrial Production

09:30 UK Visible Trade Balance

10:00 Greek Unemployment Rate

11th August

07:00 German Consumer Price Index

 

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Joe Mayhew

Currency Dealer

T: (0) 1442 892 069

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