GBP/EUR Update: Pound to Euro Exchange Rate Rises Thanks to Pre-PMI Optimism
On a relatively quiet data day, the recent Pound to Euro (GBP/EUR) exchange rate rise has been caused by GBP trader optimism about upcoming UK PMI activity readings.
Outside of the speculation for PMI readings, the Pound has also appreciated because of reports of rising business optimism.
A Lloyds Bank survey has shown that over half of surveyed businesses are more confident about economic conditions now compared to three months ago.
This has been an especially positive story as the UK economy is believed to have struggled during the first quarter of 2018, based on recent ONS GDP estimates.
Returning to the UK PMI speculation which has boosted the Pound, the actual data releases for April are due on 1st, 2nd and 3rd May.
The manufacturing sector reading on the 1st is tipped to show a slowdown, but otherwise higher construction and services activity has been predicted.
If all three PMI readings show above-forecast growth during April, the Pound could rally against the Euro later this week.
Euro to Pound Exchange Rate Slides on Slowing Retail Sales and Trade Tariff Fears
Unlike the Pound, the Euro has had a poor start to the week by falling in the EUR/GBP exchange rate and dropping against other regular peers as well.
This deterioration follows the news that German retail sales in March have slowed for the month-on-month reading for the fourth month in a row.
Forecasting a potential recovery in the months ahead, JP Morgan’s Greg Fuzesi said;
‘Looking ahead, things should pick up significantly in April/May, when many of the recently negotiated pay increases kick in and when the recent surprise weakness could finally unwind’.
Another factor which has lowered confidence among Euro traders today has been the news that US tariffs on EU steel exports might be enacted on 1st May.
The EU was granted temporary exemption from the tariffs when they were first proposed, but since then no permanent deal has been agreed.
There is a slim possibility of an exemption extension being granted to EU negotiators, but the fear is that this will not materialise to the loss of countless Eurozone steel producers.
The Euro could fall further against the Pound on 2nd May, when Eurozone GDP growth rate estimates for Q1 will be released.
These are predicted to show a slowdown in the first three months of 2018, which would be a poor start to the year for the Eurozone.