Surprising Jump in Eurozone Services Activity Keeps Pound to Euro Exchange Rate Pressured

Pound to Euro Exchange Rate Struggles to Recover as Euro Appeal Resilient 

The Pound’s (GBP) recovery attempts this week have not led to any meaningful gains in the Pound Sterling to Euro (GBP/EUR) exchange rate. Eurozone data continues to beat expectations and support Euro (EUR) strength. 

Since opening this week at the level of 1.0999, GBP/EUR has seen highly mixed movement. GBP/EUR dipped to a July low of 1.0945 before rebounding to a weekly high. 

However, GBP/EUR quickly gave up those best levels and slipped below the week’s opening levels again. 

At the time of writing on Friday, GBP/EUR was flagging low in the region of 1.0970, not far from those July lows. 

Pound (GBP) Exchange Rates Steadier as Today’s UK Data Beats Forecasts 

The Pound has seen mixed movement throughout the past week. Hopes for signs of recovery as well as strong data have not been enough to offset uncertainty and concerns over Brexit however. 

Today’s European session has seen the publication of Britain’s June retail sales results and Markit’s July PMI projections. The data all came in notably higher than forecasts, bolstering hopes that Britain’s economy was rebounding from the coronavirus pandemic. 

However, the pandemic’s long-term outlook, combined with Brexit uncertainties, continue to weigh heavily on Sterling’s appeal. 

For now, markets still expect a Brexit deal will eventually be made despite continued divisions in talks. According to Lee Hardman, Currency Analyst at MUFG: 

‘Despite a lack of progress, market participants are still assuming a last minute trade deal will be reached later this year when the alternative is to impose another self-inflicted shock onto the UK and European economies which are still reeling from the unprecedented COVID-related disruption’ 

Euro (EUR) Exchange Rates Find Continued Support as Eurozone Data Impresses 

For the Euro, currency markets continue to see a series of supportive factors. 

This week has been yet more positivity for the Euro outlook. As EU leaders agreed to a Recovery Fund to help with the coronavirus quicker than expected, this has supported the Euro’s appeal. 

On top of EU Recovery Fund news, the Euro continues to find support in key Eurozone data. 

This week’s Eurozone data has been generally optimistic. In particular, today’s Eurozone PMI projections from July came in notably above forecasts in key prints. 

Services beat forecasts across the bloc. Overall, the Eurozone’s services PMI came in at 55.1 rather than the forecast 51. 

Still, there are concerns that there could be further weakness ahead. According to Chris Williamson, Chief Business Economist at IHS Markit: 

‘The data add to signs that the economy should see a strong rebound after the unprecedented collapse in the second quarter. 

However, while the survey’s output measures hint at an initial v-shaped recovery, other indicators such as backlogs of work and employment warn of downside risks to the outlook.’ 

Pound to Euro (GBP/EUR) Exchange Rate Focused on Coronavirus and Eurozone Stats 

Coronavirus and Brexit uncertainties are likely to continue pressuring the Pound to Euro (GBP/EUR) exchange rate. 

As markets remain anxious about Britain’s coronavirus situation, as well as a lack of developments in UK-EU Brexit talks, investors are unlikely to buy the Pound much going forward either. 

Unless there is surprising positive Brexit news next week, Britain’s quieter economic calendar means GBP/EUR will be driven more by coronavirus news and Eurozone data. 

Fresh hopes for a recovery from the coronavirus pandemic could boost risk-sentiment and the Pound. 

The Euro outlook, on the other hand, could be influenced by key Eurozone data due towards the end of next week. 

Thursday will see the publication of the Eurozone’s June unemployment rate report. German inflation will be published as well. 

Friday’s Eurozone data may be even more key, with French and Eurozone growth rate results that could influence the Pound to Euro (GBP/EUR) exchange rate. 

Reprinted from futurecurrencyforecast.com, the copyright all reserved by the original author. 

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