There are a wide variety of factors likely to impact this week’s GBP EUR exchange rate forecast, including PMIs, growth figures and the European Central Bank’s (ECB) September meeting. Will Pound Sterling (GBP) exchange rates be able to continue last week’s rally, or will sentiment fade?
The Pound Euro currency pair has had a strong start to the week so far, with Sterling rallying against its peers on the back of a stronger-than-forecast Services PMI for the UK. The forecast-trumping result supported the view that the UK has so far weathered the fallout from the vote to Brexit better-than-anticipated.
- GBP EUR Exchange Rate Forecast to Reach 1.2 – But only if Monday data impresses
- UK Stats Beat Expectations Last Week – August rebound indicated after July downtick
- UK Services PMI Impresses – Will GBP continue last week’s positive trend?
- Forecast: ECB Meet This Week – Is further Eurozone stimulus possible?
GBP EUR Exchange Rate Forecast Fails to Hold Tuesday Highs
The Pound to Euro exchange rate gave up on a strong surge on Tuesday afternoon and continued to fluctuated with an upward bias on the day’s opening levels, following the publication of a surprisingly disappointing US dataset.
Immediately after ISM’s Non-Manufacturing Services Composite report was published on Tuesday afternoon, the US Dollar plummeted having a wide impact on the forex market.
Sterling initially soared across the board due to its recent increase in appeal. However, other key USD rivals like the Euro also benefitted from the USD selloff making it difficult for Sterling to capitalise.
GBP/EUR briefly hit the key level of 1.2 before investors adjusted the pair lower – a high not seen since mid-July.
It is still likely that the Pound could advance on the Euro on Wednesday if UK data beats expectations. This means that breaking past the key level of 1.2 is a strong possibility for the GBP EUR exchange rate forecast.
(Previously updated 15:38 BST 06/09/2016)
GBP EUR Exchange Rate Forecast to Slow Advances Until Wednesday
The Pound to Euro exchange rate fluctuated with a slight upward bias on Tuesday morning, but struggled to surpass its best levels and near levels of 1.20 as Monday’s Sterling bullishness ran out.
The Euro was slightly strengthened by the day’s decent Eurozone stats. Germany’s August Retail PMIs improved from 52 to 54.1, bringing the Eurozone’s Retail PMIs to 51 following July’s contraction of 48.9.
Eurozone Gross Domestic Product (GDP) also met expectations, with Q2 2016’s final scores coming in at 1.6% and 0.3%, matching preliminary scores.
Sterling has another opportunity to advance on Wednesday if NIESR’s UK August GDP estimate beats forecasts. However, if Euro investors solidify their positions ahead of Thursday’s European Central Bank (ECB) meeting the Euro may hold its ground.
The UK is also due to publish Manufacturing and Industrial Production reports for July on Wednesday, both reports have the potential to support Sterling if they prove more robust than currently forecast.
Estimates are for a monthly dip in manufacturing production of -0.3% and a -0.2% slip in industrial production. Much of the data previously published has revealed declines in July as various industries had a knee jerk reaction to the UK’s decision to Brexit from the European Union on June 23rd. If these reports stick to that trend Sterling could experience something of a reversal.
(Previously updated 9:00 BST 06/09/2016)
GBP EUR Exchange Rate Forecast to Edge Higher
Sterling’s advances may begin to slow this week, as the British currency nears its post-Brexit highs against many major currencies.
While markets continue to hope that the perceived uptick in August economic activity will continue in September rather than slump again, investors will be hesitant to let Sterling advance too high while the Brexit process itself still contains so many unknowns.
Markit’s own forecasts include suggestions that Britain’s economy could be stagnant or grow by an ultra-low 0.1% in Q3, which is still a poor figure compared to the course the economy was on from January to June.
Euro sentiment remained generally low on Monday, with Eurozone investors anxious as Thursday’s European Central Bank (ECB) meeting approached.
The bank is not expected to introduce further stimulus measures, but some investors are preparing for the possibility after all the underwhelming data collected in August.
On Tuesday German Factory Orders data came in at 0.2% on the month in July, bettering the -0.1% forecast. However, the annual figure of -0.7% disappointed forecasts.
The nation is also due to publish its Construction and Retail PMI reports.
(Previously updated 13:20 BST 05/09/2016)
Services PMI Smashes Forecasts, Pound Euro Exchange Rate Firms
GBP EUR exchange rates gained as forecast after the UK’s Services PMI came in above forecast levels.
The gauge rebounded from contraction in July to rise from 47.4 to 52.9, seeing the Pound Euro exchange rate rally to a high of 1.1972.
The data prompted this response from David Noble of the Chartered Institute of Procurement & Supply;
‘Business optimism ricocheted back to pre-Brexit levels, reassured by market stability and clients bringing dormant projects back to life. Whether this steadiness continues will largely depend on the sector’s reaction to the UK Government’s approach to the Brexit negotiations as the sector keeps one eye on business as usual and one eye on possible obstacles ahead.’
Meanwhile, Markit economist Chris Williamson noted; ‘It remains too early to say whether August’s upturn is a dead cat bounce or the start of a sustained post-shock recovery, but there’s plenty of anecdotal evidence to indicate that the initial shock of the June vote has begun to dissipate. Many companies are seeing business return to normal either simply by customer confidence rising or a stoic determination to “Buck Brexit” and carry on regardless.’
The UK’s Composite PMI (which also takes into account manufacturing and construction) advanced from 47.5 to 53.6 in August, smashing the forecast of 50.8.
Ecostats for the Eurozone, meanwhile, were less impressive with the German Services and Composite PMI’s coming in below expectations.
(Previously updated 07:00 GMT 05/09/2016)
GBP/EUR gained around a cent during last week’s trade session. While the pair was initially limp below the week’s opening levels of 1.1732, it later surged thanks to a slew of better-than-expected UK datasets. On Thursday alone GBP/EUR gained over half a cent to hit a high of 1.1912.
Pound (GBP) Exchange Rates Bolstered by Surprising Manufacturing Sector Growth
The Pound was thrust higher against a basket of major currencies last week, largely thanks to an unexpected expansion in Britain’s manufacturing sector.
While Sterling started the week off making gradual advance attempts as investors resumed the previous week’s Pound rally, it gained later in the week before surging on Thursday on better-than-expected August ecostats.
Thursday’s UK August Manufacturing PMI, collected and published by Markit, was expected to improve slightly from July’s contraction of 48.3 to 49. Instead, the result printed a surprisingly strong growth of 53.3 – the sector’s highest score in 10 months.
Sterling was unable to hold its best Thursday levels as markets readjusted, still awaiting reports from Britain’s largest sector – services.
As a result, the Pound trended largely flatly on Friday and was mostly uninspired by the day’s Construction PMI figures. Construction scored 45.9 in July and was expected to score a softened contraction of 46.5 in August.
The better-than-expected figure of 49.2 helped Sterling to hold its ground, but it was Friday’s disappointing US NFP report that helped Sterling to near its weekly highs against the Euro once more.
Euro (EUR) Limp Last Week, Influenced by Cross-Flows
The Euro struggled to hold its ground last week, as Eurozone economic data was largely disappointing and failed to support the shared currency’s appeal.
Perhaps the most disappointing Eurozone dataset last week was August’s year-on-year Consumer Price Index (CPI) estimate, which came in at 0.2% despite hopes of an improvement to 0.3%.
These estimates increased worries that the European Central Bank’s (ECB) current stimulus package, introduced later this year, had failed to successfully stimulate the Eurozone’s economy. As a result, the Euro was left in low demand for most of the week.
However, the Euro was able to benefit slightly later in the weak thanks to weakness in the US Dollar.
Since the Federal Reserve’s Jackson Hole symposium in late-August, US investors had become increasingly hopeful that a 2016 Fed rate hike was still possible.
However, after last week’s US data was largely disappointing, Fed rate hike bets continued to fall and as a result US Dollar demand quickly waned again.
The Euro was able to advance on Thursday thanks to a US Dollar selloff in reaction to ISM’s August Manufacturing PMI, which revealed that US manufacturing had unexpectedly contracted last month.
However, the Euro struggled to advance again during Friday’s Non-Farm Payroll influenced USD selloff. After EUR/USD’s Thursday advance, the Eurozone lacked the supporting economic data to make a Euro rally an appealing option for investors.
GBP EUR Exchange Rate Forecast: Will the ECB Introduce New Stimulus?
This week looks to be a big one for the GBP to EUR exchange rate forecast, with slews of key UK and Eurozone data due for publication throughout the week.
Monday kicks off with August’s remaining Services and Composite PMI figures from Markit. If Eurozone scores miss preliminary figures, investors will adjust their positions on the Euro but it is Britain’s Services PMI that will be today’s most vital statistic.
After Thursday’s surprising result of UK manufacturing growth in August and Friday’s smaller-than-expected Construction contraction, markets are widely anticipating to hear about the performance of Britain’s biggest sector in August.
If Britain’s Services PMI manages to score a solid growth in August, it could sent the Pound soaring even if Eurozone data disappoints, as it will indicate better growth chances for Britain in August and thus, lower Bank of England (BoE) easing bets.
Other UK data set for publication next week includes July’s industrial and manufacturing production figures, as well as NIESR’s Gross Domestic Product (GDP) estimate for August.
However, later in the week all market eyes will be set on the Eurozone, as the European Central Bank (ECB) will hold its first meeting since July on Thursday.
The ECB is currently expected to leave policy frozen, but any mention of how soon easing measures could be expanded further after last week’s disappointing Eurozone inflation figures will be vital to this week’s GBP EUR exchange rate forecast.