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Pound Euro Exchange Rate Benefits as Eurozone Economic Confidence Fades

Last week’s high: €1.1452

Last week’s low: €1.1338

 

Underwhelming UK and Eurozone Data Drive GBP/EUR Exchange Rate Volatility

It was a volatile week for the GBP/EUR exchange rate as both the UK and Eurozone economies continued to show signs of weakness.

As January’s UK services PMI slumped to just 50.1, falling into a state of near-stagnation, the mood towards the Pound soured significantly.

With the service sector starting the year on a weak footing confidence in the economic outlook naturally diminished.

While the Bank of England (BoE) maintained a neutral policy bias at its first policy meeting of 2019 this was not enough to prevent the GBP/EUR exchange rate rallying on Thursday, however.

Downgrades to the European Commission’s 2019 growth forecasts saw the Euro come under renewed pressure, with Germany and Italy both expected to see lacklustre growth.

Even though German exports showed a solid rebound on Friday this was not enough to give the single currency much of a boost.

 

Euro Outlook: Fourth Quarter Gross Domestic Product Data in Focus

Confidence in the Pound could deteriorate further this week on the back of the latest UK gross domestic product and inflation data.

Any fresh signs that the UK economy lost further momentum in the fourth quarter of 2018 could weigh heavily on the GBP/EUR exchange rate.

On the other hand, if the economy shows greater resilience in the face of Brexit-based uncertainty the appeal of the Pound may improve.

With the BoE already looking set to remain on hold in the months ahead, though, an easing in January’s inflation rate may drag the Pound lower across the board.

Fresh selling pressure could be in store for the Euro, meanwhile, if the fourth quarter German and Eurozone GDP figures disappoint.

If Germany fails to bounce back from the contraction seen in the third quarter this could give the GBP/EUR exchange rate a solid boost.

 

Key Events

11th February

09:30   UK Gross Domestic Product

13th February

09:30   UK Consumer Price Index

10:00   Eurozone Industrial Production

14th February

07:00   German Gross Domestic Product

10:00   Eurozone Gross Domestic Product

 

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To keep up to date with the Euro, visit the EUR blog in our Currency News section.

 

Alastair Archbold

Foreign Exchange Manager

aja@fcgworld.co.uk

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