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Pound Euro Exchange Rate Benefits as Eurozone Economy Struggles to Rebound

Last week’s high: €1.1458

Last week’s low: €1.1352

Weaker German Data Leaves Euro on Weaker Footing

A raft of weaker-than-expected German data weighed heavily on EUR exchange rates last week, undermining confidence in the health of the Eurozone’s powerhouse economy.

Investors were not impressed to find that the German economy had remained sluggish in April, with factory orders, industrial production and export volumes all disappointing forecasts.

This suggests that the Eurozone may struggle to bounce back from its first quarter weakness as European Central Bank (ECB) policymakers had hoped.

Even so, as ECB chief economist Peter Praet made comments of a slightly more optimistic nature on Thursday, this encouraged the Euro to push higher against its rivals.

Speculation that the central bank will discuss winding down its quantitative easing programme at its June policy meeting gave investors fresh incentive to pile into the single currency.

However, rising trade tensions with the US still limited the strength of EUR exchange rates heading into the weekend.

Confidence in the Pound, meanwhile, strengthened on the back of an improved UK services PMI.

Hawkish sounds from Bank of England (BoE) deputy governor David Ramsden also helped to shore up the GBP/EUR exchange rate towards the end of the week.

Euro Outlook: Single Currency to Turn Jittery Ahead of ECB Meeting

The Euro looks set for further volatility over the coming days as markets brace for the ECB rate decision and press conference on Thursday.

If policymakers do discuss the end point of the long-running quantitative easing programme this could send the single currency higher against its rivals.

On the other hand, if ECB President Mario Draghi adopts a more dovish tone in comments to the press this could weigh heavily on EUR exchange rates.

Unless markets see signs that the ECB is shifting towards a tighter monetary policy the potential of the Euro is likely to remain limited.

The GBP/EUR exchange rate could also find a rallying point on the back of the latest UK wage growth and consumer price index data.

Any indication that inflation is picking back up could send the Pound into a sharp uptrend, to the benefit of the GBP/EUR exchange rate.

 

Key Events

12th June

09:30   UK Average Weekly Earnings

10:00   German ZEW Economic Sentiment Survey

13th June

09:30   UK Consumer Price Index

14th June

12:45   European Central Bank Rate Decision

15th June

10:00   Eurozone Trade Balance

 

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

 

Alastair Archbold

Currency Dealer

aja@fcgworld.co.uk

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