- GBP EUR Exchange Rate Forecast to Trade Narrowly – Lack of key stats for much of the week
- Sterling (GBP) Weakened by BoE Minutes – Bank of England hints further easing still necessary
- UK House Price Fails to Drive GBP Monday – Public finances data on Wednesday
- Forecast: First Eurozone September PMIs Due Friday – Early-week lacks influential data
GBP EUR Exchange Rate Falls on Tuesday’s Brexit News
This week’s GBP EUR exchange rate forecast has been lowered after Tuesday’s session saw the pair slipping closer to its post-Brexit lows, once again falling below the key level of 1.16.
While the Pound Euro exchange rate fluctuated around this level towards the end of the session in attempt to hold away from its lows, Sterling could continue to slip in the coming days unless data beats expectations and the Federal Reserve’s Wednesday decision offers Sterling some space.
The main source of Sterling’s Tuesday weakness was new comments from European Union leaders that Britain would not be able to undergo a Brexit and manage to keep single market access. The latest comments came from Czech State Secretary for EU Affairs Tomas Prouza.
‘There is no way whatsoever for the UK to have the cake and eat it at the same time, I see exactly zero chance of success if the UK wants to create first- and second-class citizens in Europe or if it tries to separate the four basic freedoms of movement.’
If Wednesday’s UK public sector net borrowing print for August impresses investors it could support Sterling slightly. However, with markets focused on the US economy until the Fed meets during Wednesday’s American session, GBP EUR could spend most of the day caught up in USD cross-flows.
(Previously updated 16:39 BST 19/09/2016)
GBP EUR Exchange Rate Forecast to Continue Fluctuating on Tuesday
Monday’s session ultimately did little to alter this week’s GBP EUR exchange rate forecast, as while the Pound Euro exchange rate was able to recover slightly from its Friday plummet it remained well below Friday’s best levels.
GBP/EUR struggled to hold its ground above the key level of 1.17, and fluctuated around the level of 1.1685 at the time of writing – lows not seen since late-August.
The day’s ecostats did little to influence Pound or Euro movement. Britain’s Rightmove house price report for September revealed that the yearly house price score had slipped from 4.1% to 4.0%, but as investors bought Sterling from its cheapest levels this did not cause GBP/EUR to fall lower.
July’s Eurozone current account and construction output reports are also unlikely to have influenced the Euro. Instead, it was a US Dollar selloff that boosted Euro demand the most on Monday as the US Dollar is the Euro’s most common trade partner.
(Previously updated 12:52 BST 19/09/2016)
The Pound to Euro exchange rate recovered slightly from its worst Friday levels on Monday morning, but Sterling’s appeal is unlikely to see a solid recovery without supportive data after last Friday’s comments from BoE policymaker Kristin Forbes.
Forbes made Sterling an increasingly off-putting investment last Friday due to comments she made embracing the currently low value of the currency. In a conference in Paris, she stated;
‘Sterling’s depreciation should improve the UK’s net foreign asset position by over 20 percent of GDP. That’s a big improvement in the UK’s net international asset position and that should alleviate concerns by international investors about the UK’s ability to pay on its net foreign asset position’
(Published 06:00 BST 19/09/2016)
This week’s GBP EUR exchange rate forecast will likely be influenced more by general market sentiment rather than data until the end of the week, and there’s a strong chance the Pound could continue to trend weakly on last week’s Bank of England (BoE) news.
GBP/EUR began last week at the level of 1.1813 and briefly surged to a high of 1.1875 on Tuesday. After falling to a two-week-low of around 1.1700 on Wednesday following underwhelming inflation news, the pair was kept lower by BoE news for the remainder of the week. On Friday afternoon, GBP/EUR fluctuated around the level of 1.1740.
Pound (GBP) Demand Falls on Bank of England’s (BoE) Cautious Tone
After trending sturdily since August PMI reports indicated an uptick in economic activity from July’s gloomy economic news, demand for the Pound began to wane last week.
Disappointing inflation results from August revealed that consumer prices had not spiked as some analysts had suggested, diminishing hopes that Britain could reverse July’s activity and bring Q3 to solid overall growth.
Following this, the Bank of England (BoE) held its September policy meeting on Thursday. In its first meeting since a historically aggressive stimulus package was introduced in August, it should come as little surprise that the bank took on a dovish stance.
However, many investors had hoped that the bank would be more optimistic and maybe play down the chances of further easing due to August’s solid ecostats. The Independent reported;
‘… the Bank of England also heavily hinted that a rate cut could come later this year to support a weakening economy.
“A majority of members expected to support a further cut in bank rate to its effective lower bound at one of the MPC’s forthcoming meetings during the course of the year,” the Bank said in the minutes of its latest MPC meeting. The MPC also acknowledged that in recent weeks, economic data coming out of the UK has been stronger than expected since August’s rate cut.’
With hopes of further economic strength now waning while markets wait for the first data collected in September, the Pound weakened on Thursday and Friday.
Euro (EUR) Limp as Quiet Data Fails to Support Shared Currency
The Euro seemed to be holding its ground on little more than hopes of decreased European Central Bank (ECB) stimulus last week, as the week’s ecostats did little to boost Euro appeal.
Earlier in September, the ECB surprised markets slightly by hesitating to indicate that easing measures would be extended beyond March – or that new ones would be introduced – despite analysts generally expecting that new stimulus policies would be made again before the end of the year.
This caused markets to sturdy the Euro slightly amid speculation that the ECB was becoming more hawkish and might even begin to normalise monetary policy sometime in the mid to long term.
As a result, even Thursday’s news that the Eurozone’s August Consumer Price Index (CPI) scored a very low 0.1% month-on-month didn’t undermine the Euro’s strength. Yearly inflation scores for August met preliminary results of 0.2%.
‘The European Union’s statistics agency Friday said wages during the second quarter were just 0.9% higher than in the same period a year earlier, the smallest increase since the third quarter of 2010 and a sharp slowdown from the 1.7% increase recorded in the first three months of the year.
As a result, total labor costs were up just 1% on the year, the smallest increase since the first quarter of 2014.’
GBP EUR Exchange Rate Forecast: Bank News to Drive Pound Euro Rates on Quiet Calendar
The coming week’s economic calendar will be relatively quiet, with little in the way of influential UK figures publishing throughout the week and the Euro’s only influential data not due until Friday.
GBP/EUR is likely to spent Monday reacting to the morning’s house prices report from Rightmove, as well as last Thursday’s Bank of England (BoE) news.
As a result, it’s unlikely that the Pound will see a significant shift in sentiment and is unlikely to increase in value for most of the week unless investors decide to buy the currency up from its lows. However, Sterling’s value is currently quite middling, a profit-taking rally is also unlikely.
As for Eurozone news, no considerably influential news will be published until Thursday’s September consumer confidence report and Friday’s highly anticipated preliminary September PMIs.
These will be the reports to watch this week, as the first results of the Eurozone’s economic activity this month. Ultimately, this week’s GBP EUR exchange rate forecast is unlikely to see considerable shifts from Friday’s limp movement until Thursday or Friday’s Eurozone stats are published.