Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Edge Higher on ‘Brexit’ Fears
The Euro to Pound Sterling (EUR/GBP) exchange rate edged higher by around 0.1% on Thursday morning.
Having declined yesterday in the face of US Dollar strength and geopolitical uncertainty, the single currency edged higher today thanks to traders taking advantage of the comparatively low trade weighting. A softer US Dollar, as traders await US Durable Goods Orders, has also supported demand for the single currency.
However, today’s domestic data produced mixed results erring towards negativity. Whilst German Import Prices declined beyond expectations on both a monthly and annual basis in February, April’s German Consumer Confidence unexpectedly declined.
Another less-than-ideal European ecostat was the publication of the European Central Bank’s (ECB) economic bulletin. The ECB cut growth forecasts for 2016 – 2018 and also reduced inflation projections in the same time frame. Policymakers cited weak global economic conditions as the main reason for slower-than-expected inflationary and economic growth in the Eurozone.
The Bulletin stated; ‘The March 2016 ECB staff macroeconomic projections for the Eurozone foresee annual real GDP increasing by 1.4% in 2016, 1.7% in 2017 and 1.8% in 2018. Compared with the December 2015 Eurosystem staff macroeconomic projections, the outlook for real GDP growth has been revised slightly down, mainly reflecting the weakened growth prospects for the global economy.’
It went on to say; ‘The March 2016 ECB staff macroeconomic projections for the Eurozone foresee annual HICP inflation at 0.1% in 2016, 1.3% in 2017 and 1.6% in 2018. In comparison with the December 2015 Eurosystem staff macroeconomic projections, the outlook for HICP inflation has been revised down, mainly reflecting the fall in oil prices over recent months.’
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7928.
Meanwhile, the British Pound continues to struggle against political uncertainty. The recent tragic events in Brussels had the greatest impact on demand for the Pound amid concerns it will fuel anti-EU sentiment.
British data has done little to offset losses in response to increased fear that the UK will vote to leave the European Union in the June 23rd vote. However, today’s data was comparatively positive. February’s Retail Sales bettered expectations on both a monthly and annual basis, and BBA Loans for House Purchase remained robust in the same month.
‘Retailers had another strong month in February compared with last year, with the exception of clothing and footwear,’ ONS statistician Melanie Richard said. ‘Some of those stores have been telling us that sales of their new spring and summer collections were hit by the cold and wet weather last month.’
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Trend Narrowly ahead of US Durable Goods Orders Data
The Euro to US Dollar (EUR/USD) exchange rate was trending within a limited range on Thursday morning.
Since the terrorist attacks in Brussels roiled markets, safe-haven demand supported significant US Dollar gains. Also aiding the US Dollar appreciation has been increased speculation that the Federal Reserve will have no choice but to hike rates thanks to economic conditions, irrespective of the Dollar’s high trade weighting.
‘Although any pent-up pass-through effects from Dollar appreciation remain a downside risk to core PCE inflation, that alone does not appear to be a compelling reason for lower inflation over the course of the coming two years,’ stated Goldman Sachs analysts Zach Pandl and Elad Pashtan.
On Thursday morning, however, US Dollar appreciation has slowed significantly as traders take advantage of attractive selling opportunities. What’s more, many pundits are treading cautiously ahead of February’s Durable Goods Orders data which is currently forecast to decline by -3.0%.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1170.
Euro Exchange Rate Forecast: French GDP to Provoke Volatility
Whilst a disappointing result from US Durable Goods Orders data could push the Euro higher, there is a real chance that the ECB’s dovish bulletin will keep the single currency anchored.
Therefore, traders will likely be looking ahead to Friday’s French Gross Domestic Product data to gauge volatility. With that said, markets will likely be subdued with most Eurozone nations holidaying in celebration of Good Friday.
The British Pound is unlikely to rack up any notable gains as political uncertainty continues to overshadow domestic ecostats.
Meanwhile, there is a high chance that the US Dollar will weaken if Durables meets with expectations of a significant contraction.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending within the range of 0.7914 to 0.7946 during Thursday’s European session.
The Euro to US Dollar (EUR/USD) exchange rate was trending within the range of 1.1147 to 1.1186.