UK/Euro Currency Report

Weak Eurozone PMIs Boost GBP/EUR Exchange Rate

Last week’s high: €1.1210

Last week’s low: €1.1059

 

Weaker Eurozone PMIs Weigh Heavily on Euro Exchange Rates

Some unexpected downward revisions to August’s raft of Eurozone PMIs left the Euro on a generally weaker footing over the course of the week.

While both the manufacturing and service sectors remained firmly in growth territory, the loss of momentum does not bode well for the third quarter gross domestic product data.

As the latest German trade and factory orders figures highlighted fresh weakness within the Eurozone’s powerhouse economy this put further pressure on EUR exchange rates.

With global trade tensions continuing to mount German exports saw a -0.9% contraction on the month in July, giving investors fresh incentive to move out of the Euro.

The GBP/EUR exchange rate also benefitted from renewed market optimism surrounding Brexit.

Comments from chief EU negotiator Michel Barnier saw the Pound surging higher across the board once again, with investors encouraged by his statement that ‘the no-deal scenario is not our scenario.’

As markets continue to hope for greater progress towards a finalised deal this was enough to shore up GBP exchange rates ahead of the weekend.

 

Euro Outlook: BoE and ECB Policy Announcements in Focus

It looks set to be an even more volatile week for the GBP/EUR exchange rate with both the Bank of England (BoE) and European Central Bank (ECB) delivering interest rate decisions on Thursday.

Although no change in monetary policy is expected from either central bank at this stage markets are still likely to react to changes in tone in the latest policy statements.

Any signs of increased confidence from either the BoE or the ECB could see the GBP/EUR exchange rate shift sharply.

On the other hand, if BoE policymakers express greater caution over the UK outlook this would leave the Pound vulnerable.

Evidence that the ECB is shifting towards a more hawkish outlook would give the Euro a solid boost against its rivals.

However, weaker Eurozone data could derail the case for the ECB to return to a monetary tightening bias, undermining the strength of EUR exchange rates.

 

Key Events

10th September

09:30   UK Trade Balance

09:30   UK Monthly Gross Domestic Product

11th September

09:30   UK Average Weekly Earnings

10:00   German ZEW Economic Sentiment Survey

12th September

10:00   Eurozone Industrial Production

13th September

12:00   Bank of England Rate Decision

12:45   European Central Bank Rate Decision

 

info@blueoceanestates.es

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