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Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast – Eurozone Inflation and UK GDP Data Due out this Week


The Euro to Pound Sterling (EUR/GBP) Exchange Rate is forecast to experience volatility next week.

With the showdown between Greece and its creditors dominating market sentiment over the past week, economists will be hoping that the issue will be resolved as they look nervously ahead to the end of the month.

Next week, the Euro is expected to experience mixed movement because of a number of major market moving economic data releases. The Greek situation meanwhile needs to be resolved by February 28 due to that being the date where Greece’s current bailout programme ends, potentially leaving Greece out of cash.

On Monday, the main data release will be the latest IFO Business Climate expectations and conditions reports for Germany. Economists are forecasting that the figure will dip from the previous figure of 106.7 to 104.48. The cause for the dip would likely be a result of concerns over the Greece crisis and the ongoing conflict in Ukraine. Business confidence is also expected to have deteriorated in the Netherlands.

A lack of UK data releases however will likely lead to the EUR/GBP exchange rate seeing muted movement.

Tuesday sees the publication of final Gross Domestic Product (GDP) data for Germany. The report is forecast to show that the Eurozone’s largest economy expanded by 0.7% on a quarterly basis, a stronger figure than the previous figure of 0.1%. On a annual basis, the German economy is expected to have expanded by 1.6%, better than the 1.2% seen in the previous report.

Also of interest will be Eurozone inflation data. On a month-on-month basis, inflation is expected to have fallen at a slower pace in January compared to the previous figure. Annually, inflation is likely to have fallen by -0.6%, a sharper decline than the previous figure of -0.2%. A sharper than expected fall and the Euro will likely fall.

Thursday will see the release of the latest German unemployment figures and Eurozone confidence reports. The jobless rate in Germany is widely expected to remain unchanged at 6.5%. Confidence in the Eurozone economy is likely to have been knocked lower in February as concerns over Greece and the conflict in Ukraine weigh upon sentiment.

The Pound meanwhile could advance against the Euro if second estimate fourth quarter GDP data comes in strongly. The GDP rate is expected to have risen by 0.5% on a quarterly basis and by 2.7% on an annual basis.

As the week draws to an end the Euro, could falter if data out of Spain, Italy and Germany disappoint.

Also in focus will be the situation in Ukraine. If fighting intensifies, speculation will increase that the EU and its allies will introduce more sanctions against Russia.

UK domestic politics could affect the GBP  due to no clear winner expected in the upcoming general election.