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EUR GBP Exchange Rate Forecast: Euro Holds Near 6-Year Highs

Pound Euro exchange rate forecast

  • EUR GBP Exchange Rate Forecast to Hold Above 0.90 – Strong US Dollar limits Euro advances
  • Thursday Data Fails to Influence EUR GBP – German inflation meets preliminary scores
  • Update: Friday Lacks Influential Data – Limp trade for Euro and Pound
  • Forecast: European Central Bank Meet Next Week – Could ECB wind down quantitative easing?

EUR GBP Exchange Rate Forecast: European Central Bank Meeting in Focus Next Week

Next week’s EUR GBP exchange rate forecast will be a lot more heavily reliant on economic data and European Central Bank (ECB), as Friday’s session comes to a close with the Euro Pound exchange rate still largely flat.

While the pair struggled to return to the Tuesday night’s seven-year-high, EUR GBP was able to hold above the key level of 0.90 on Friday afternoon and looked to end the week just slightly higher than the week’s opening levels.

A surge in demand for risk-correlated investments on Friday afternoon left the Euro weaker despite the day’s decent Eurozone stats, and as a result EUR GBP continued to trend flatly.

Eurozone markets will take center stage next week as economists look ahead to next Thursday’s European Central Bank (ECB) meeting, but economic data due throughout the week could also cause more inspired changes to the EUR GBP exchange rate forecast.

(Previously updated 12:44 BST 14/10/2016)

EUR GBP Exchange Rate Forecast: EUR GBP to End Week Near Opening Levels

This week’s EUR GBP exchange rate forecast was little changed by midday on Friday. However, the Euro once again trended weaker as Sterling attempted recovery. At various points in the morning, EUR GBP fell as low as 0.89 as some investors bought Sterling from its cheapest levels.

The morning’s data, as expected, did little to influence movement in the Euro or Pound. The Eurozone’s August trade surplus scores came in above expectations. The seasonally adjusted figure improved over the previous month’s score of 20b, to reach 23.3b.

(Previously updated 10:10 BST 14/10/2016)

Thursday’s headlines were dominated by #MarmiteGate. Although the prospect of limited Marmite supplies created concern, the news had little impact on the Euro Pound (EUR GBP) exchange rate. With ‘hard Brexit’ concerns persisting and sentiment towards the Pound still weak, the EUR GBP currency pair is likely to remain trending close to 6-year highs as we head into the weekend.

During Friday’s European session the Euro Pound exchange rate edged slightly lower despite UK Construction Output unexpectedly falling in August. The surprising 1.5% drop in monthly construction volumes didn’t appear to be connected to Brexit.

Office for National Statistician Kate Davies commented; ‘As the fall this month is lead by infrastructure, it seems unlikely that post-referendum uncertainties are having an impact.’

Looking ahead to next week, the UK’s latest inflation data may cause further Euro Pound exchange rate movement. While the Pound has become decoupled from domestic data to a certain extent in the face of Brexit concerns, significantly higher inflation might prompt the Bank of England to reconsider cutting exchange rates to a new record low in the near future.

Friday’s EUR GBP exchange rate forecast sees little change from the rest of the week’s movement, as Sterling will likely continue to fluctuate between recovery attempt and ‘hard Brexit’ weakness, while the Euro will be held back by a bullish US Dollar.

EUR GBP has trended largely flatly since markets opened at around 0.90 this week, seeing a similar pattern of weakening in the morning then strengthening in the evening as Sterling sentiment fluctuates. The pair has been unable to hold Tuesday’s seven-year-high of 0.91.

Euro (EUR) Wavers on Strong US Dollar, ECB Jitters

Despite impressive Eurozone ecostats published throughout the last week, demand for the Euro itself has been mixed, largely due to global cross flows in the foreign exchange market.

The Euro’s biggest currency rival, the US Dollar, has extended a bullish run throughout the entirety of the week so far due to increasing bets of a December Federal Reserve rate hike. As a result, the Euro has struggled to hold its best levels.

Eurozone markets have also become increasingly jittery on speculation that the Eurozone’s inflation is finally improving enough for the European Central Bank (ECB) to begin winding down on its aggressive quantitative easing measures.

The effectiveness of the ECB’s QE package has been in question for some months among the central bank’s critics.

Speculation and rumours that the ECB could be moving away from this practise and back to more normalised monetary policy sooner-than-expected have made it difficult for investors to take solid positions on the Euro, another reason for its volatility this week.

Pound (GBP) Remains Limp, Low Sterling Value Seemingly Hits UK High Street

Continuing a trend that has lasted for much of the week, the Pound has trended limply but has remained above levels of key psychological support, somewhere between attempting recovery and slumping on market ‘hard Brexit’ concerns.

Thursday’s UK economic headlines were dominated by news that a row had emerged between retail chain Tesco and famous brand supplier Unilever. Unilever is the supplier for many brands which are household names in Britain, such as Marmite, Pot Noodle, and PG Tips.

The row has emerged as the increasingly low value of Sterling since the Brexit vote has hit import and export costs. Unilever’s financial reports are priced in EUR, and many of its product’s ingredients are priced in USD.

Differing views on the situation rocked headlines, with some urging Tesco to bend and increase prices, and others claiming Unilever to absorb the difference in Sterling value itself. Roy Williams, managing director of supply firm Vendigital, stated;

‘Anyone that thinks Unilever is just trying it on, are wrong. The cost pressures facing many UK suppliers are very real at the moment. Deep falls in the value of the Pound since the EU Referendum are cutting deeply.

However, Unilever may not have thought its position through carefully enough. Pursuing across-the-board price increases from customers is a blunt attempt to offset rising costs and this kind of approach would not stand up to detailed cost analysis by Tesco.’

Sterling’s plummet in value appears to have finally taken a real effect on the British high street and concerns that things may only get worse from here left UK trade jittery on Thursday.

EUR GBP Exchange Rate Forecast: Strong Euro Pound Movement Unlikely Friday

This week’s EUR GBP exchange rate forecast was little changed by Thursday’s session, as Sterling continued to flounder near key psychological support levels amid ‘hard Brexit’ worries while the Euro shed value to the US Dollar once more.

Friday’s session will see little in the way of influential data. Britain’s seasonally-adjusted August construction output figures will be published, as well as the Eurozone’s August trade balance results. These reports are unlikely to influence EUR GBP movement much throughout the day.

Instead, markets will continue to take the same positions on the currencies as any other day this week.

The Euro will continue to have solid Eurozone data undermined by US Dollar strength and ECB jitters, while the Pound is held back from making a sustained recovery due to ‘hard Brexit’ concerns taking hold of UK market movement.

Next week has a much more eventful EUR GBP exchange rate forecast however, as September inflation results are published for the Eurozone and UK early in the week, while the ECB is set to hold its October policy meeting on Thursday.