The GBPEUR exchange rate is moving higher on Wednesday for a third-straight day to shake off the stagnation at the 1.15 level. The UK PMI numbers were the catalyst for further gains with the fastest growth since 1997. The Bank of England will meet on Thursday to deliver the latest monetary policy and interest rate announcement and the pair could be quiet before then.
The GBP v EUR trades at 1.1590 in early trading and will look to hold onto to those gains to retest the 1.18 highs from early-April.
European numbers unlikely to spur movement
Data on Wednesday for the Eurozone is not high-level and may not move the pair much. Traders will be unwilling to make any big bets ahead of the BoE meeting tomorrow and we may see some consolidation.
Germany, Italy and Spain will see the release of services data, while the latter will release an unemployment update from April.
The Eurozone will release composite PMI data for April and this indicator tracks both the services and manufacturing sectors. Manufacturing figures came in close to expectations on Tuesday, but a little lower and the ongoing restrictions will take the heat out of services gains. Germany did see a fast rebound for retail sales this week so there is potential for a small gain.
In other news, Bank of France governor Francois Villeroy de Galhau has played down the risk of insolvencies in the Eurozone as governments wind down aid for businesses. Insolvencies have been around 40% below average levels since the pandemic began and this made it difficult for courts, while governments provided a wide range of support to companies.
Bank of England will likely follow its peers
The Bank of England dominates this week’s economic calendar and the Monetary Policy Committee will share its latest interest rate and monetary outlook. The market knows that 0.1% rates will be the opener, but they are more interested in the bank’s statements regarding stimulus measures.
The British economy has powered ahead and many analysts feel that large bond buying efforts are unnecessary now. Despite that, the bank will likely follow other central banks in playing down any tapering of stimulus measures and push it off into the distance. The Australian central bank dug its heels in yesterday by saying it will focus on employment and the BoE may do something similar. The bank will also play down any inflation fears as the Federal Reserve did last week.
The banks are not in any hurry to signal changes to the market and are happy to let the economy push forward through a potentially fragile stage. The US and UK economies could probably taper their bond buying, but the stimulus is coming from all angles, such as the $2 trillion Biden stimulus plan and its hard to know where the bubbles lie.
GBPEUR has the April highs at 1.18 and the support levels would be the 1.15 and 1.280 levels now.