UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate edged higher by around 0.2% on Monday afternoon.
As Monday’s European session progressed the GBP/EUR exchange rate reversed trend to tick higher. The appreciation can be linked to consolidative trading amid fears that ‘Brexit’ uncertainty has been priced-in too soon. The Euro continues to struggle amid expectations that ECB President Mario Draghi will continue to call for additional stimulus measures should it become necessary.
Hopes that this week’s UK employment figures will show an increase in average earnings also lent the Pound support and the GBP/EUR exchange rate was trending in the region of 1.2630 as markets opened on Tuesday.
Other UK data with the potential to trigger GBP/EUR exchange rate movement this week includes the nation’s retail sales and public sector net borrowing figures.
Yesterday…
- UK house prices hit record high
- ECB interest rate decision in focus this week
- George Osborne highlights dangers of ‘Brexit’
- Draghi forecast to maintain stance on additional stimulus measures if required
Pound Sterling (GBP) Exchange Rate Forecast to Soften on EU Referendum Uncertainty
The Pound Sterling to Euro (GBP/EUR) exchange rate edged lower by around -0.2% on Monday morning.
Despite registering positive domestic data results, the British Pound softened versus most of its major peers. The depreciation can be linked to a warning from Chancellor George Osborne regarding the dangers of a ‘Brexit’ to the average income. Having missed budget targets, however, opposition claim confidence in Osborne’s words is lacking.
‘The poorest are the people whose incomes would go down, whose house prices would fall whose job prospects would weaken, they are the people who always suffer when the country takes an economic wrong turn,’ Osborne said.
However, Conservative MP John Redwood dismissed the warning as ‘erroneous’, stating;
‘This is a Treasury which failed to forecast the huge damage membership of the European Exchange Rate Mechanism inflicted on us and they were always very keen to join us and it gave us a huge recession. They failed to forecast the damage to the UK of the Eurozone crisis of 2011.’
Amid heightened demand for buy-to-lets, before a new tax hike on second homes took effect on April 1st, house prices climbed to a record. Average asking prices rose 1.3% from March; leaving values 7.3% higher than a year earlier.
‘Many of those who sold during the buy-to-let rush were actually first-time buyers looking to trade up,’ said Rightmove Director Miles Shipside. ‘They used the heightened demand from investors competing fiercely with first-time buyers to springboard themselves onto the next rung of the housing ladder.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2560.
Euro (EUR) Exchange Rate Forecast to Hold Steady on ECB Uncertainty
Whilst the Euro has made modest gains versus most of its major peers on Monday morning, the single currency is unlikely to rack up any significant appreciation amid uncertainty regarding European Central Bank (ECB) policy outlook.
Whilst most analysts do not expect policymakers to alter outlook in this week’s meeting, given that the latest stimulus measures will need to be given time to have a notable impact, many analysts predict that President Mario Draghi will look to reiterate his stance that using additional stimulus measures is necessary.
The central bank is due to deliver its latest interest rate decision on Thursday. In March the central bank shocked investors by cutting interest rates and expanding the scope of quantitative easing.
Hans-Helmut Kotz, program director at the SAFE Policy Center said;
‘The European economy is largely an economy that is funded through the banking industry. It could go further in terms of what it calls emphasizing its enhanced credit support policies… it might even think about decreasing interest rates further.’
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.2500 during Monday’s European session.
GBP/EUR Exchange Rate Forecast: Eurozone ZEW Economic Sentiment Survey to Provoke Volatility
Given the absence of further data pertaining to both the UK and the Eurozone, there is a high chance that the GBP/EUR exchange rate will hold losses for the remainder of Monday’s European session. With that said, however, US housing data has the potential to provoke volatility thanks to EUR/USD negative correlation.
Tuesday will be significant for the GBP/EUR exchange rate despite a complete absence of British data. April’s Eurozone ZEW Economic Sentiment Survey will be very likely to cause changes for the shared unit.
With a lack of domestic data to impact movement, the UK asset is likely to continue to trade in response to political developments regarding the EU referendum.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.2565 during Monday’s European session.
