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GBP EUR Forecast: Can Exchange Rate Recover from Lows This Week?

  • GBP EUR Forecast to Head Towards 1.12 – Quieter news could give Pound some reprieve
  • Friday Pound Crash Hits GBP Exchange Rates – Sterling far weaker due to mysterious trade
  • Forecast: Opportunity for Sterling Recovery – Low-influence UK data gives GBP breathing room
  • Forecast: German Data in Focus This Week – Includes business confidence and inflation stats

GBP EUR Forecast: Pound Could Struggle to Recover if Brexit Jitters Remain

Monday’s session has seen the Pound left limp, and this week’s GBP EUR forecast increasingly reliant on the presence of ‘hard Brexit’ jitters in foreign exchange markets.

Sterling crashed across the board at the close of last week – hitting several new multi-year lows against the majority of its currency rivals – and has so far failed to recover ground.

While the ‘flash crash’ on Friday was one of the main causes of GBP losses, the currency was already performing poorly as a result of ongoing Brexit fears.

The Euro trended weakly throughout Monday, allowing Sterling to attempt to recover due to comments from ECB President Draghi indicating that the Brexit vote was indeed economically significant despite a lack of obvious effects thus far. This, and increased demand for its rival the US Dollar, kept the Euro weighed down on Monday.

The shared currency was boosted slightly by the day’s Eurozone stats, which beat expectations. Germany’s trade surplus score improved from 19.5b to 20b, while the Eurozone investor confidence survey from Sentix jumped from 5.6 to 8.5.

Despite this, GBP EUR’s advance attempts were heavily limited as concerns that Britain would take a ‘hard Brexit’ continued to weigh on the Pound.

UK Prime Minister Theresa May also confirmed on Monday that she would not allow MPs to vote on the terms of the Brexit, further dashing hopes of single market access being part of negotiations.

(Published 07:00 BST 09/10/2016)

The coming week’s GBP EUR forecast has been heavily altered by exchange rate news from last Friday, as a sudden plummet in Sterling value during quiet market hours shook forex markets and left the Pound at new lows across the board.

GBP EUR began last week trending around the level of 1.15, but experienced selloffs throughout the week as Brexit jitters rocked Sterling sentiment. By the end of the week, the pair had lost around 4 cents in value and had hit its lowest levels in six years.

Pound (GBP) Undermined by Friday’s Mysterious Crash

Friday morning of last week saw Sterling take another heavily unexpected turn, as a trade made in the early hours of Friday morning caused a plummet in Sterling value that subsequently put investors off the currency towards the end of the week.

Analysts are split when it comes to what actually caused the currency’s plummet, with some suggesting it was a mistake made by a trader, and others suggesting an automatic algorithm overreacted to Brexit comments made by French President François Hollande. Analysts suggest it will be difficult to find out for sure what caused the movement.

One theory that is gaining steam however is that the Pound is becoming more a political-driven currency than an economic-driven one. According to HSBC’s head of FX, David Bloom;

‘Brexit, whether one likes it or not, is a political decision, one we have to respect. The currency is now the de facto official opposition to the government’s policies. …

The Pound used to be a relatively simple currency that used to trade on cyclical events and data, but now it has become a political and structural currency. This is a recipe for weakness given its twin deficits.’

The day’s UK data failed to give the currency a boost, as Britain’s trade deficit printed worse-than-expected in August’s report.

Euro (EUR) Holds Ground on German Data, Weaker US Dollar

The Euro trended a little more sturdily towards the end of the week, and as a result was able to hold Sterling back from any sustained recovery attempts during Friday trade.

Friday morning saw the publication of Germany’s August industrial production figures, which were expected to improve slightly from previous results. The report’s findings came in well above expectations, soaring from -1.5% to 2.5% month-on-month and from -1.3% to 1.9% year-on-year.

The shared currency was also bolstered slightly by mixed sentiment towards the US Dollar during Friday’s American session, as the premiere US currency was sold in favour of its European rival.

This movement came as a result of the US September Non-Farm Payroll report, which revealed that the US labour market had performed disappointingly in September.

As a result, the Euro was able to strengthen against many of its major rivals towards the end of the week and keep Sterling’s recovery attempts at bay.

GBP EUR Forecast: German Data to Influence Euro while Pound Traders Contemplate Recovery

The coming week’s GBP EUR forecast will most likely not see as much action as last week’s movement.

While markets continue to come to terms with the high likelihood that Britain will not be remaining in the European Union’s single market after the Brexit process is complete, Sterling’s impressively low value could make it appealing to tourists – and investors looking to buy the currency cheaply.

Britain’s economic calendar is set to be highly uneventful in the week ahead, meaning Sterling trade will be heavily reliant on political news and market sentiment towards the currency.

If markets continue to show objection to last week’s Brexit news, this could weigh on Sterling recovery attempts. Fresh Brexit news could also hinder Pound advances.

However, the lack of key data could see the currency recovering in quieter trade, using last week’s positive economic data and lower Bank of England (BoE) easing bets as supportive ground.

As for the Euro, German data is most likely to drive movement in the shared currency in the week ahead. Monday’s session will see the publication of Germany’s August trade balance figures and the Eurozone’s October investor confidence report from Sentix.

Tuesday’s session could also influence Euro movement, as ZEW will publish its October economic sentiment survey for Germany and the Eurozone.

Germany’s final September Consumer Price Index (CPI) scores will be published later in the week, giving Eurozone data plenty of opportunity to influence the coming week’s GBP EUR forecast.