Pound Sterling (GBP) Trends Lower as UK Floods Forecast to Impact GDP
Demand for the Pound (GBP) has remained limited on Wednesday morning as heavy rain and flooding continues to batter much of the UK. As the extent of the damage is forecast to shave 0.25% off the nation’s GDP in the coming year this has done little to improve the outlook of the currency, keeping the Euro to Pound Sterling (EUR/GBP) exchange rate trending higher in the region of 0.7378.
The outlook for Pound Sterling (GBP) has weakened today after suggestions of overvaluation, allowing the Euro (EUR) to extend its gains in spite of weaker Eurozone data.
Euro (EUR) Exchange Rates Continue to Strengthen after Dovish ECB Comments
Unsurprisingly European Central Bank (ECB) executive board member Yves Mersch took a more dovish tone with regards to the central bank’s outlook for the coming year in recent comments. While Mersch reiterated the oft-repeated refrain that the ECB could well opt to loosen monetary policy further in 2016 this ultimately failed to dampen the buoyancy of the Euro (EUR), with the single currency continuing to climb against rivals this week. The impact of cautious commentary from ECB policymakers has become markedly more limited in the wake of the market-disappointing nature of quantitative easing expansion announced at December’s policy meeting.
Deutsche Bank Proclaims Pound Sterling Most Overvalued Currency, EUR/GBP Exchange Rate Bolstered
While economic data is relatively thin on the ground in the days between the Christmas and New Year’s holidays today saw the release of the latest Spanish Retail Sales and Italian Consumer Confidence Index. However, in spite of both showing a general weakening in consumer sentiment, the single currency has remained on an uptrend.
Demand for the Pound (GBP), meanwhile, has been dented after Deutsche Bank branded the currency as one of the most overvalued in the world. Pundits equally remain concerned that the Bank of England (BoE) will fail to deliver an interest rate rise over the coming year, given the recent dovishness of policymakers and more fragile prospects of the domestic economy. With global downside risks continuing to loom large in 2016 and worries already rising over the upcoming Brexit referendum the prospects of Sterling seem bearish.
EUR/GBP Exchange Rate Forecast: UK House Prices Data to Provoke Pound Volatility
Tomorrow’s UK Nationwide House Prices report may prompt a rally for Pound Sterling, however, if the domestic housing market continues to show strength. An increase in house prices could benefit the EUR/GBP exchange rate, though, if a stronger figure provokes fresh suggestions of a persistent property bubble.
Should Spain’s December inflation rate demonstrate the expected return to positive territory on Wednesday the Euro could extend its recent gains further, as the improving health of the major Eurozone economy is likely to inspire greater confidence in the single currency.
Current EUR, GBP Exchange Rates
At time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was climbing around 0.7394, while the Pound Sterling to Euro (GBP/EUR) pairing was slumped in the region of 1.352.