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GBP/EUR Exchange Rate Forecast to Tick Lower after Eurozone Core Inflation Betters Estimates

Pound Sterling to Euro (GBP/EUR) Conversion Rate Predicted to Soften despite Rising British Consumer Confidence

The Pound Sterling to Euro (GBP/EUR) exchange rate edged lower by around -0.1% on Friday afternoon.

Despite the fact that domestic data produced positive results, the Pound Sterling softened versus the majority of its most traded currency rivals. The depreciation is likely to be the result of trader profit-taking after yesterday’s GDP result sparked a healthy Sterling uptrend. January’s GfK Consumer Confidence Survey was predicted to drop from 2 to 1, but the actual result unexpectedly rose to 4.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics told clients that: ‘The optimism of consumers contrasts starkly with increased corporate pessimism. The Economic Sentiment Indicator for the UK produced by the E.C., which covers business and consumers, fell in January to its lowest level since March 2013 and is now slightly below the EU average. With the government retrenching, exports uncompetitive and investment potentially subdued in the run-up to the EU referendum, continued momentum in consumer spending won’t prevent a further slowdown this year.’

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3128.

Euro to Pound Sterling (EUR/GBP) Conversion Rate Predicted to Edge Higher despite Concerns that Rise in Eurozone Core Inflation is Temporary

Eurozone Core Consumer Prices bettered estimates in January, with the annual figure reaching 1.0% despite predictions core inflation would hold at 0.9%. This caused the Euro to edge higher versus a number of its major peers, although the appreciation has been limited and could well prove short-lived. This is because many analysts predict that this is only a temporary reprieve with commodity prices and emerging markets continuing to struggle.

‘It’s just a technical positive adjustment, but for the coming months we could see some weakness — maybe in the next six months,’ Christophe Barraud, chief economist at Market Securities LLP in Paris, said before the report. ‘CPI should remain contained.’

The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3070 during Friday’s European session.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Trend Narrowly ahead of US Data

Given that the headline figure for Eurozone core inflation masks underlying difficulties, there is a high chance that the GBP/EUR exchange rate will shore up to trend narrowly. Later today, US annualised fourth-quarter GDP and Core Personal Consumption Expenditure has the potential to provoke market movement and therefore GBP/EUR exchange rate volatility.

The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.3225 during Friday’s European session.