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Euro to Pound Sterling Exchange Rate Forecast: EUR/GBP Strengthens after Mixed UK Inflation Data

Pound Sterling (GBP) Trends Lower Ahead of UK Employment Data Today

Ahead of today’s raft of UK employment data the Euro to Pound Sterling (EUR/GBP) exchange rate has continued to trend higher in the region of 0.7820, as pundits anticipate that domestic wage growth will prove disappointing. The Pound (GBP) is also on softer form as negotiations over the UK’s future in the European Union look to be hitting resistance.


EUR/GBP Exchange Rate Climbs despite Weaker Economic Sentiment

Following better-than-expected ZEW Economic Sentiment Surveys the Euro (EUR) has been on stronger form on Tuesday afternoon. Confidence in the Pound (GBP), meanwhile, has taken a strong downturn as investors reassessed their initial impressions of today’s inflation data. As a result the Euro to Pound Sterling (EUR/GBP) exchange rate was making strong gains around 0.7797.


The Euro to Pound Sterling (EUR/GBP) exchange rate has continued to slump this morning after the latest UK inflation data showed a modest uptick in annual inflationary pressure.

Euro (EUR) Trended Lower as Dovish Draghi Increased Odds of March QE

With safe-haven demand diminished in the wake of a sustained market rally, the Euro (EUR) faltered against rivals on Monday. As the reopening of the Shanghai Composite Index failed to trigger any particular resumption in bearish sentiment and the Nikkei Index closed up an impressive 7% traders were inclined to move away from the lower-yielding single currency. This dovishness was reinforced in the afternoon when European Central Bank (ECB) President Mario Draghi spoke to members of the European Parliament, reiterating that the central bank is willing to do whatever it takes to support the Euro. As this seemed to imply that further quantitative easing measures are a strong possibility at March’s policy meeting, the common currency continued to slump across the board.

Confidence in the Pound (GBP), meanwhile, was somewhat improved by a stronger Rightmove House Prices report, as the domestic housing market was revealed to have accelerated 7.2% on the year in February. Although there are concerns that a bubble is continuing to form within house prices this more positive sign of strength within the UK economy saw Sterling making gains against the Euro.

Stronger UK Inflation Bolsters Demand for Pound Sterling (GBP) Today

This morning Sterling has continued to trend higher, boosted by expectations of a moderate uptick in domestic inflationary pressure. While the latest baseline Consumer Price Index reading revealed that inflation had risen 0.3% on the year in January this was somewhat tempered by a larger dip in the core measure than pundits had been expecting. However, this more mixed result failed to weigh on demand for the Pound, extending the current Euro to Pound Sterling (EUR/GBP) exchange rate slump.

EUR/GBP Exchange Rate Forecast: Slower Wage Growth Predicted to Drag on Pound Sterling

Later this morning the ZEW Economic Sentiment Surveys are expected to show that confidence within both Germany and the wider Eurozone declined sharply in February. Given recent market turbulence and increasing concerns of a global slowdown, however, any resilience in domestic sentiment could help to shore up the single currency.

Tomorrow’s raft of UK employment data may weigh on the strength of the Pound, as wage growth is forecast to have continued weakening in spite of another expected drop in the Unemployment Rate. As wages remain a key issue in the Bank of England’s (BoE) assessment of monetary policy a weaker showing here is likely to push back expectations of the first interest rate hike further.

Current EUR, GBP Exchange Rates

At the time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was trending lower at 0.7708, while the Pound Sterling to Euro (GBP/EUR) pairing was making gains in the region of 1.2972.