The pound struggled at the start of this week’s session as sentiment was shaken by heightened political uncertainty in the UK.
The German economy demonstrated fresh signs of resilience last week, bolstering the euro as confidence in the outlook of the Eurozone’s powerhouse economy improved.
March’s German trade data proved encouraging as the surplus widened further than forecast on the month, fuelled by an unexpected rebound in export volumes.
This improvement suggests that the German economy is recovering from the impact of recent global trade tensions, even as the US continues to escalate its trade spat with China.
Annual Eurozone growth data also impressed, coming in at 1.3% rather than 1.2%.
Confidence in the euro could pick up further if April’s finalised Eurozone consumer price index (due out tomorrow) confirms a solid uptick in inflationary pressure.
Signs that inflationary pressures are rising would give the European Central Bank (ECB) incentive to maintain a cautiously optimistic outlook, limiting the risk of further monetary loosening.
The pound, meanwhile, is being buffeted by Brexit news while the US dollar is responding to the latest US/China trade developments.
Next week’s run of PMI reports for the Eurozone could help the euro sustain its uptrend.
If output in the services and manufacturing sectors improves we could see EUR/GBP and EUR/USD rally.
Tuesday 21st May 2019
10:00 EUR OECD Economic Outlook
15:00 EUR Eurozone Consumer Confidence
Wednesday 22nd May 2019
08:00 EUR ECB President Draghi Speaks in Frankfurt
09:30 GBP Consumer Price Index
Thursday 23rd May 2019
09:00 EUR Markit Services, Composite, Manufacturing PMIs
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