Eur/gbp Pushes Higher On Weak Uk Growth

Discussion in 'General Trading Discussion' started by DanielH, May 25, 2018.

  1. DanielH

    DanielH Active Member

    Mar 2018
    Likes Received:
    Confirmation that UK growth eased to just 0.1% in the first quarter of 2018 offered something of a boost to the Euro to Pound Sterling (EUR/GBP) exchange rate ahead of the weekend.

    This disappointed hopes that the data might see an upward revision in its second estimate, leaving exchange rate euro on a generally weaker footing.

    Signs continue to point towards a more fragile UK economy, as Rob Kent-Smith, Head of GDP at the Office for National Statistics (ONS), commented:

    ‘Overall, the economy performed poorly in the first quarter with manufacturing growth slowing and weak consumer-facing services. Oil and gas bounced back strongly, however, following the shutdown of the Forties pipeline at the end of last year.

    ‘While there was some evidence of the poor weather hitting construction and high street shopping, this was offset to an extent by increased energy supply and online sales.’

    With the odds of a summer Bank of England (BoE) interest rate hike declining further this prompted GBP exchange rates to shed further ground on Friday.

    Steady German Business Confidence Boosts EUR/GBP Exchange Rate
    The Euro to Pound Sterling (EUR/GBP) exchange rate found further support on the back of May’s German IFO business sentiment survey.

    After five months of declines the business climate index held steady at 102.2, suggesting that anxiety over the domestic outlook may soon start to ease.

    While signs from the Eurozone’s powerhouse economy have proved rather mixed in recent days this steady showing still helped to improve the appeal of the Euro (EUR).

    Further gains could be in store for EUR exchange rates next week if the latest German unemployment data offers investors fresh cause for confidence.

    If the German unemployment rate holds steady at its multi-decade low of 3.4% this should give fresh encouragement to the single currency.

    However, lingering political jitters surrounding the populist alliance taking power in Italy could see EUR exchange rates falter once again.

    Euro Pound Sterling (EUR/GBP) Exchange Rate to Benefit from Continued Brexit Uncertainty
    With fresh UK data a little thin on the ground in the coming days the downside potential of the Euro to Pound Sterling (EUR/GBP) exchange rate looks set to remain limited.

    As long as the odds of a 2018 BoE interest rate appear in doubt the mood of Pound Sterling exchange rates is unlikely to shift away from bearishness.

    Worries over Brexit may drag on demand for the Pound next week, with markets still jittery over the prospect of negotiations between the UK and EU breaking down.

    Unless there are signs of progress on the key issue of the Irish border GBP exchange rates will remain under some degree of pressure.

    Continued disagreement within Theresa May’s cabinet could also offer a boost to the Euro to Pound Sterling (EUR/GBP) exchange rate as the next EU summit approaches.

Share This Page