Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Rally despite Mixed UK Ecostats
The Pound Sterling to Euro (GBP/EUR) exchange rate advanced by around 0.9% on Friday morning.
Yesterday saw heightened market volatility in response to the European Central Bank (ECB) policy decision and outlook. After President Mario Draghi stated that the central bank do not expect to cut rates further, the single currency rallied. This caused the GBP/EUR exchange rate to soften considerably.
On Friday morning, however, the Pound has made significant daily gains against its neighbour. It is probably fair to say that the GBP/EUR appreciation is mostly the result of Euro depreciation rather than Sterling strength.
British economic data produced varied of results today which has seen the Pound endure a mixed-faring versus its major peers. January’s Total Trade Balance saw the deficit narrow less-than-anticipated, but annual Construction Output contracted less-than-forecast.
One key area of the trade data, which may provoke Sterling depreciation as today’s session progresses, was the UK’s trade with the EU saw the deficit widen the most in six-years. This could bolster claims of those campaigning for the UK to leave the EU that the UK does not benefit from trading with the EU.
‘With the UK holding a referendum on EU membership in three months, every aspect of the economies’ relationship is being fought over by campaigners. Those who want to leave — a so-called “Brexit” — say the UK should focus on new markets, while those in favour of remaining argue Britain can benefit from the EU’s clout in global trade,’ stated Scott Hamilton writing for Bloomberg.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2887.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Decline despite Draghi Comments
After ECB President Mario Draghi stated that the central bank would not cut rates further, the single currency surged versus its major peers. This opened up a number of attractive selling opportunities. As a result, Friday has seen the Euro depreciate versus most of its rivals.
Profit-taking aside, however, risks to Euro exchange rates remain skewed to the upside, especially with the US Dollar forecast to struggle against reduced Federal Reserve rate hike bets.
Today’s German inflation data had minimal impact with profit-taking overshadowing results. February’s German consumer prices met with the market forecast of 0.0% on the year and 0.4% on the month.
In response to the German consumer prices data, a report from Deutsche Welle stated; ‘Destatis inflation report for February cited the continuing sharp decline in crude oil prices as the main reason for the lower rate. It said the inflation rate would have been in positive territory were in not for the oil price slide. Energy prices as a whole were 8.5% lower in February compared with the same time last year.’
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.2734 during Friday’s European session.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Osbourne Budget Speech in Focus
Next week will see the Bank of England (BoE) interest rate decision. However, this is not expected to be hugely impactful given that most do not expect any changes from policymakers. The principle focus will be Chancellor George Osbourne’s budget speech to parliament.
Significant European economic data will be somewhat thin-on-the-ground next week, but the Federal Reserve interest rate decision has the potential to provoke EUR volatility. If the Fed outlook proves to be dovish the Euro will likely advance.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.2891 during Friday’s European session.