Euro holders will have been left fairly frustrated by EURGBP exchange rates this week after seeing their early week gains to the high 0.885 (interbank) retreat back below the mid 0.87 mark. The drop comes as further need for financial stimulus across the bloc has been echoed from one European government to the next which might force the European central bank into action.
This morning’s early industrial output release from France’s leading statistics body INSEE could prove to be the trend setter for EURGBP exchange rates as the week draws to an end. An somewhat considerable if not surprising slowdown into close to negative territory from the previous 1.3% reading reflects a clear lack of optimism within the French industrial sector, with many factories being forced to close and put a high number of its head count onto the government subsidy scheme.
Throughout last year we had seen a similar decline in industrial output from Europe’s major players as a result of the trade tensions between the US and China, leading to a global contraction and an overall lack of demand across multiple key sectors. At the time this did draw a fair amount of pressure onto EUR exchange rates, with investors growing ever so conscious of business sentiment within the eurozone, which had fallen to record lows at many intervals throughout 2019. It will be interesting then to see how the markets will react this time round.
ECB and International Monetary Fund decisions pending in the month of April
The release could also act as a precursor to next week’s wealth of data covering consumer conditions and inflation readings across France, Spain and Italy.
The same releases from last month arguably went some way to force the European central Bank’s hand in approving a €750 billion emergency bond purchasing scheme and drew a fair amount of volatility to EUR exchange rates as a result. If you are in the position of needing to buy pounds with euros feel free to get in touch using the form below to get speak to us and discuss your requirements, or reach out to your account manager ahead of Wednesday’s release to help plan around those releases.
Francois Villeroy de Galhau, ECB policy maker has already said he is open to further “money printing” to help businesses provide the stability to the zone needs. Historically this tends to weaken the currency in question and so could set the euro on a negative trend as time goes on.
Importantly, the International Monetary Fund, who are responsible for maintaining financial stability and favourable lending conditions, is next scheduled meeting is set for Saturday the 18th of April which potentially could draw extra weight to the releases mentioned above.