With the announcement of better-than-expected economic data from both the UK and Europe, the euro remained range bound against the pound yesterday. As the German business climate indicator reached a one-year high, UK sales data exceeded market expectations. In the previous 24 hours, the EUR/GBP moved between 0.8776 and 0.8805.
According to the data published by the ifo Institute, the German business climate index rose to 93.30 in March from 91.10 in February and surpassed forecasts of 91. The reported reading reflects the highest level since February 2022. Notably, confidence among firms increased for the fifth successive month, despite the latest global banking issues, high prices, and borrowing expenses.
The position index increased to 95.40 in March from 93.90 in February. Likewise, the expectations index grew to 91.20 from 88.40.
Sector-wise, the index representing the processing business surged to 6.60 in March from 1.50 in February.
The service sector index inched up to 8.90 from 1.30. The expectations index hit its highest level since February 2022. Numerous service providers anticipate sales to rise.
The trade index improved to -10 from -10.60. Both the indices for expectation and the business situation rose slightly. Several enterprises there remain pessimistic about the upcoming months.
Also, the construction industry index improved to -17.90 from -19. The improvement was mainly due to a decline in pessimism. Nevertheless, the construction firms called the prevailing business scenario slightly worse.
According to the data published by the European Central Bank, the growth rate of the Eurozone M3 money supply was 2.90% y-o-y in February, down from 3.50% in the previous month. Economists had anticipated a growth rate of 3.20%.
Also, the M1 money supply, which comprises currency in circulation and overnight deposits, recorded a negative growth of 2.70% in February, compared with a negative growth of 0.80% in the earlier month.
Furthermore, private loans rose by 3.20% y-o-y in February following an increase of 3.60% in January. Economists had anticipated a private loan growth of 3.60%. However, the loans to non-financial corporations fell by 5.70% in February from 6.10% in January.
According to the Confederation of British Industry, the UK’s retail sales volumes grew (weighted balance) by 1% in March following a 2% growth in February. Economists had anticipated a decline of 2%. In April, as per the survey, the sales are anticipated to rise by 9%, reflecting the first positive growth forecast since September 2022.
Furthermore, retail sales were 12% higher in March compared with the average level for this period. Retailers anticipate sales to be higher by about 13% in April compared with the normal level for this period.
Orders received by suppliers fell by 2% in March following a decline of 25% in February. Suppliers do not anticipate any major change in April.
Inventories, in relation to expected sales, at retailers are 10% higher in March compared with 8% in February. Inventories are forecast to decline slightly in April, but remain at 6% higher than expected sales.
E-commerce declined by 26% in the year to March from -30% in February. In April, e-commerce is expected to increase by 5%.
The solid economic data from both the UK and Europe are expected to keep the EUR/GBP pair range bound in the short term.
The historical price chart indicates that the EUR/GBP pair is declining after facing resistance at 0.8865. The next major support is anticipated only near 0.8740. Additionally, the EUR/GBP pair is trading below its 50-day moving average while the stochastic indicator is in the bearish zone. Therefore, we anticipate the currency pair to remain in a downtrend in the days ahead.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
