The Euro to Pound Sterling (EUR/GBP) exchange rate strengthened by around 0.44% on Monday morning.
After speculation mounted that the Swiss National Bank intended on maintaining an unofficial Euro cap, the shared currency strengthened versus the majority of its most traded currency peers.
The Pound Sterling, meanwhile, is trending lower versus most of its major peers on Monday morning. This is likely to be as a result of Labour edging the polls as we approach the general election. Most business’ fear that if labour wins they will not have sufficient economic competence.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7527.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending within a range of 0.7498 and 0.7536 at the close of last week.
After the Federal Reserve was seen to be optimistic about their economic outlook, traders speculate that they will be the first of the central banks to hike rates. Rate hawks will hope that the Bank of England (BoE) will follow suit by altering policy rhetoric, but most experts agree that any change is unlikely with inflation falling into negative territory.
The BoE’s chief economist, Andy Haldane, recently inferred that the central bank is in no rush to increase borrowing costs, and that any rate hikes will be small and gradual.
He commented; ‘The recovery is taking hold nicely. The last thing we want to do is knock the stuffing out of that.’
The Euro, meanwhile, strengthened over the course of last week despite some disappointing domestic data. Even with Eurozone core inflation dropping beyond expectations, the single currency maintained its upward momentum. This can be attributed to traders expecting that once the European Central bank (ECB) initiates their quantitative easing programme, inflationary issues will be rectified.
Euro (EUR) Exchange Rate Forecast to Strengthen ahead of Expansive Measures
With the situation in the coming week not dissimilar from that of the week past, in regards to traders waiting for the introduction of quantitative easing, the likelihood that domestic data will have a significant impact is small. Therefore, with little to curb the trend, the Euro has the potential to extend gains over the coming week. However, there is the potential for downward pressure from Greece if the new prime minister continues to vex German officials.
On the off chance that data will be impactful, Thursday’s European data is most likely to be of significance. German Factory Orders, German Construction PMI, German Retail PMI, Eurozone Retail PMI and the ECB Economic Bulletin have the greatest potential to provoke single currency movement.
Pound Sterling (GBP) Exchange Rate Forecast to Soften on Dovish BoE
Given that Bank of England policymakers were united in their decision to hold rates in January – unlike previous meetings in which two of the policy makers argued for an immediate hike – most experts expect more inaction from the British central bank. Should this be the case, the Pound is likely to soften versus its major peers as traders make comparisons with the Federal Reserve.
Given the current inflationary outlook, the 9 members of the Monetary Policy Committee are likely to continue voting in favour of low interest rates for the foreseeable future.
However, there will be a few influential domestic data publications with the potential to spark Sterling volatility. The Manufacturing PMI, Construction PMI, Services PMI, Composite PMI, Visible Trade Balance, Trade Balance non EU and Total Trade Balance will be of interest to those trading with Pound Sterling.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7512 at the close of last week.