Pound Euro (GBP/EUR) Exchange Rate Dips as Thin Data Calendar Blights GBP

June 5, 2023 - Written by John Cameron

STORY LINK Pound Euro (GBP/EUR) Exchange Rate Dips as Thin Data Calendar Blights GBP

Pound Euro (GBP/EUR) Exchange Rate Dips as Thin Data Calendar Blights GBP

The Pound Euro (GBP/EUR) exchange rate weakened on Monday, as a lack of key data releases sapped sentiment towards Sterling.

At the time of writing, GBP/EUR traded at around €1.1589, a fall of around 0.3% from Monday’s opening rates.

Pound (GBP) Cushioned by Services PMI Uptick

The Pound (GBP) was cushioned on Monday, as the final UK services PMI printed above preliminary readings, marking strong growth in the sector.

However, as the increase was to 55.2 above 55.1 and still reflected a fall from April’s 12 month high of 55.9. This may have undercut the optimism surrounding the figure.

Tim Moor, Economics Director at S&P Global, commented: ‘Service sector businesses have experienced strong growth so far in the second quarter of 2023, fuelled by resilient demand for consumer and technology services, combined with a post-pandemic tailwind as households switched from spending on goods to services.’

However, a wider lack of significant data releases likely kept GBP on the back foot during Monday’s European session. With little in the way of catalysts for movement, Sterling appeared unable to capitalise on the risk on market mood.

Euro (EUR) Quiet as Investors Await Lagarde Speech

The Euro (EUR) saw minimal support during the early European session on Monday, as investors awaited a speech from European Central Bank (ECB) Christine Lagarde.

With President Lagarde likely to remain hawkish, investors stayed cautious as they awaited clearer indications on the ECB’s path forward in regard to rate hikes.

Elsewhere, downbeat data releases may have weighed on the common currency. The Eurozone Sentix Investor Confidence Index weakened in June’s reading, and printed below forecasts. The index came in at -17.1, far below a forecast of -9.2 and a drop from May’s reading of -13.1.

Manfred Hubner, Managing Director at CEFA, commented: ‘This raises the question of whether the recession has already begun in the Eurozone. A question that has already been answered for Germany. A look at the sentix data of the largest economy then clearly shows that the cause of the misery in Euroland is probably linked to the weakness of the German economy. It is of little help that expectations have improved slightly, as they remain negative at -18.3 points.’

Elsewhere, strength in the US Dollar was likely keeping the Euro under pressure on Monday. As these two currencies share a negative correlation, the ‘Greenback’ gaining ground likely sapped sentiment towards the common currency.

Pound Euro (GBP/EUR) Exchange Rate Forecast: German Data to Boost EUR?

Looking ahead for the Euro (EUR), the core catalyst of movement is likely to be German industrial data. On Tuesday, Germany’s latest factory orders data for April is forecast by economists to shoot up from -10.7% to 3.5%.

If this prints accurately, it could reflect a staunch improvement in the bloc’s largest economy’s output. As such, this could bring strength to the single currency by indicating promising signs for the Eurozone’s economy at large.

This could then be compounded on Wednesday, with the release of the latest industrial production data for April. Germany’s production is forecast to have increased by 0.5% on a monthly basis, which would offer further indication of increased economic recovery in the German economy.

Elsewhere, EU retail sales data is due to print on Tuesday. This is also forecast to show a recovery over April, with sales expected to have increased by 0.2%. This could bring further strength to EUR.

For the Pound (GBP), meanwhile, the short term is rather bereft of impactful macroeconomic data releases. Because of this, Sterling may struggle for support and may be left vulnerable to shifts in market dynamics and risk appetite.

As an increasingly risk sensitive currency, the Pound could gain ground if the market mood improves in the coming days. However, if cautious trade remains the default, it could weaken against the Euro.

However, continued bets on further tightening from the Bank of England (BoE) may keep Sterling underpinned over the next couple of days.

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TAGS: Pound Euro Forecasts