GBP/EUR: Economic data have diverged – Lloyds Bank

Relative to the market’s expectations, UK economic data continue to disappoint, while Euro area data remain resilient and this has potentially been a contributory factor to the downward pressure on GBP/EUR, explains Gajan Mahadevan, Quantitative Strategist at Lloyds Bank.

Key Quotes

“Economic data paint contrasting pictures for the UK and Euro area economies respectively. Based on Citi Surprise Indices, UK data has been somewhat subdued. This has been evident across a variety of sectors. Retail sales continue to warn of consumers weakening in a difficult macroeconomic environment. Furthermore, industrial production and construction / manufacturing PMIs underperformed expectations, highlighting that both ‘hard’ and ‘soft’ data have been disappointing.”

“Across the English Channel, Euro area data provide more reasons to be optimistic. Q1 GDP was revised up to 1.9%y/y (from 1.7%y/y) and CPI, at 1.3%y/y, beat the consensus expectation. Moreover, industrial production and manufacturing, services and composite PMIs have all been stronger than expected. This evidence, to some degree, highlights the resilience of the Euro area economy.”