Homepage » News » EUR/GBP » EUR/GBP Exchange Rate Forecast to Rally after UK Inflation Misses Estimates

EUR/GBP Exchange Rate Forecast to Rally after UK Inflation Misses Estimates


Euro to Pound Sterling Ticks Higher despite Slower-than-Expected German Manufacturing Output

The Euro to Pound Sterling (EUR/GBP) exchange rate advanced by around 0.9% on Tuesday afternoon.

Despite ongoing concerns that the European Central Bank (ECB) may be forced into easing policy even further, despite predictions from President Mario Draghi that no more rate cuts are likely, the Euro made modest gains yesterday. However, the appreciation was anchored by US Dollar strength.

On Tuesday morning the single currency softened versus most of its major peers. This is due to a mixed-bag of domestic ecostats and continued US Dollar appreciation. One particularly disappointing data result was the German Manufacturing PMI which failed to meet with expectations of an increase from 50.5 to 50.8, with March’s result actually dropping to 50.4. This is dangerously close to the 50 mark that separates growth from contraction.

‘It looks as if momentum in the German economy will remain sluggish in the months ahead,’ said London-based economist Oliver Kolodseike. The PMI results are ‘indicative of moderate, although unspectacular GDP growth, similar to the rates seen during the last two quarters.’

The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7886.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Soften as Brussels Tragedy Seen Raising ‘Brexit’ Risk

With the explosions in Brussels airport this morning being considered as an act of terrorism, the Pound softened considerably amid concerns that the tragedy will bolster the case for those who wish to exit the European Union.

‘The most negative reaction is for GBP,’ stated London based economist Athanasios Vamvakidis. ‘Any events that could give, to some people, arguments against migrants and refugees — such as a terrorist attack — could increase ‘Brexit’ risks.’

The British Pound also came under pressure after February’s Consumer Price Index failed to meet with expectations of 0.4% on the year, with the actual result holding at 0.3%. Core consumer prices did, however, meet forecasts of 1.2%.

In response to the latest British inflation figures, the Office for National Statistics said; ‘Since the start of 2015, prices for transport costs, food and non-alcoholic beverages and (to a lesser extent) recreational and cultural goods and services have had a downward pull on the rate of inflation. These have been counterbalanced by an upward pull from price movements for other goods and services, most notably restaurant and hotel bills, and education costs such as university tuition fees.’

The Euro to Pound Sterling (EUR/GBP) exchange rate dropped to a low of 0.7812 during Tuesday’s European session.

EUR/GBP Exchange Rate Forecast to Hold Gains on ‘Brexit’ Uncertainty

Despite the mixed-bag of results from European data, and irrespective of comparative US Dollar strength, the EUR/GBP exchange rate is likely to hold gains. This is because uncertainty surrounding the ‘Brexit’ is likely to weigh heavily on Sterling sentiment until the June 23rd referendum vote.

With a complete absence of British economic data on Wednesday the UK Pound is likely to continue fluctuating in response to political developments. Wednesday’s Eurozone Consumer Confidence report has potential to provoke EUR/GBP exchange rate volatility, however.

The Euro to Pound Sterling (EUR/GBP) exchange rate climbed to a high of 0.7906 during Tuesday’s European session.