- The EUR/GBP gains traction to around 0.8500 in the first European session on Wednesday.
- Retail sales in Germany increased 2.2% year -on -year in March.
- The operators expected the BOE to cut its rate in a quarter quarter to 4.25% at the May monetary policy meeting.
The EUR/GBP crossing is negotiated in positive territory about 0.8500 during the first European session on Wednesday. The euro (EUR) remains strong behind German economic data. The operators will change their attention to the advanced estimate of the Gross Domestic Product (GDP) of the first quarter of Germany later on Wednesday. In addition, the GDP growth rate of the first quarter for the Eurozone will be published the same day.
The data published by Destatats on Wednesday showed that retail sales in Germany fell 0.2% monthly in March, compared to the growth of 0.8% observed in February. This figure was better than the estimate of -0.4%. In annual terms, retail sales increased 2.2% in March compared to the previous 4.3% (reviewed from 4.9%). The shared currency attracts some buyers in an immediate reaction to the stronger German retail sales data than expected.
In addition, the operators increase their bets that the Bank of England (BOE) will reduce interest rates when it announced its next movement on May 8, which could drag the GBP down. Financial markets have discounted almost 96% possibility that the BOE cuts its rate in a quarter to 4.25% when you announce its next movement on May 8, according to a Reuters survey.
The operators will keep an eye on the preliminary report of the Eurozone GDP, which could influence the EUR. The eurozone economy is expected to grow 0.2% intertrimestral in the first quarter (Q1). If the reports show a stronger result than expected, this could raise the EUR in the short term.
Euro Faqs
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most negotiated currency in the world, behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily business volume of more than 2.2 billion dollars a day. The EUR/USD is the most negotiated currency pair in the world, with an estimate of 30 %of all transactions, followed by the EUR/JPY (4 %), the EUR/GBP (3 %) and the EUR/AU (2 %).
The European Central Bank (ECB), based in Frankfurt (Germany), is the Eurozone reserve bank. The ECB establishes interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the rise or decrease in interest rates. Relatively high interest rates (or the expectation of higher types) usually benefit the euro and vice versa. The GOVERNMENT BOOK of the ECB makes decisions about monetary policy in meetings that are held eight times a year. The decisions are made by the directors of the National Banks of the Eurozone and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the harmonized consumer prices index (IPCA), are an important economic indicator for the euro. If inflation increases more than expected, especially if it exceeds 2% of the ECB, it forces the ECB to rise interest rates to control it again. Relatively high interest rates compared to their counterparts usually benefit the euro, since they make the region more attractive as a place for global investors to deposit their money.
Published data measure the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer trust surveys can influence the direction of the single currency. A strong economy is good for the euro. Not only attracts more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. The economic data of the four largest economies in the euro zone (Germany, France, Italy and Spain) are especially significant, since they represent 75% of the economy of the euro area.
Another important fact that is published on the euro is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will gain value simply by the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
