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GBP/EUR Exchange Rate Forecast to Trend Narrowly after UK Government Borrowing sees Worst October since 2009

Pound euro exchange rate

Pound Sterling to Euro (GBP/EUR) Conversion Rate Predicted to Trend within a Tight Range Today

The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a limited range on Friday afternoon.

After British public sector financing data saw the biggest deficit in any October since 2008, the Pound slumped versus its currency rivals. October’s Public Sector Net Borrowing was predicted to rise by 5.3 billion, but the actual result saw borrowing at 7.5 billion. In addition, Public Sector Net Borrowing excluding Banking Groups rose to 8.2 billion in October despite the median market forecast 6.0 billion. These disappointing figures will have come as a blow to Chancellor George Osborne who will now be very unlikely to meet fiscal targets for 2015/16.

Howard Archer, chief UK and European economist at IHS Global Insight, said: ‘George Osborne now has an almighty task to meet his fiscal targets for 2015/16. Indeed, if the pattern of the first seven months of the fiscal year continued, PSNB would amount to £80.3bn in 2015/16, which would mean that Mr Osborne would overshoot by some £11bn the target of £69.5 billion contained in his July budget.’

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.4250.

Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Hold Steady on Dovish Draghi

Over the Channel, the single currency also declined versus its peers after European Central Bank (ECB) President Mario Draghi made a dovish speech. Once again, Draghi reiterated the Frankfurt-based central bank’s willingness to do whatever it takes to stimulate price pressures in order to return them to the target of just under 2%. Draghi said the risk had increased that the ECB would miss that target. ‘If we decide (on Dec. 3) that the current trajectory of our policy is not sufficient to achieve our objective, we will do what we must to raise inflation as quickly as possible,’ he told a conference in Frankfurt.

The single currency dived in response to the commentary, but recovered some of its losses as the European session progressed after Bundesbank’s president Jens Weidmann made the case for holding off from easing policy. ‘I see no reason to talk down the economic outlook and paint a gloomy picture,’ Weidmann said at the same event at which Draghi spoke. ‘We should also not forget that the monetary policy measures already taken still need time to fully feed into the economy.’

The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.4233 during Friday’s European session.

GBP/EUR Forecast: Significant US Data to Provoke Volatility Next Week

Although there will be several influential domestic data publications with the potential to provoke changes for the Pound Sterling to Euro (GBP/EUR) exchange rate, the plethora of high-impact US data is much more likely to provoke GBP/EUR changes next week. This is thanks to EUR/USD negative correlation. US Gross Domestic Product, Personal Consumption, Core Personal Consumption Expenditure, Consumer Confidence and Durable Goods Orders could all impact the GBP/EUR conversion rate.

Friday’s British 3rd-quarter Gross Domestic Product should be of significance for those invested in the British asset. For those trading with the Euro, Monday’s German and Eurozone Manufacturing, Services and Composite PMIs will be of interest.

The Pound Sterling to Euro (GBP/EUR) exchange rate advanced to a high of 1.4316 during Friday’s European session.