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GBP/EUR Exchange Rate Forecast to Trend Narrowly as EU Summit Drags On into Weekend


Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Trend Statically despite Positive UK Retail Sales

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

British economic data produced better-than-anticipated results today but the Pound failed to capitalise. This is due to uncertainties regarding the outcome of the EU summit as talks between Prime Minister David Cameron and member states are predicted to continue into the weekend. This has dampened confidence that Cameron will be able to secure a deal given that he has committed to only accepting a ‘credible deal’.

Of particular significance in terms of domestic data, however, was government borrowing and retail sales data. The UK public finances show the largest January surplus since 2008, and January’s Retail Sales advanced by 2.3% and 5.2% on the month and year respectively.

In response to the British government finances data, Paul Hollingsworth of Capital Economics said: ‘This still leaves the Chancellor with some work to do over the next few months if he still wants to meet this forecast. After all, he is left with around £7bn left to borrow in February and March – last year he borrowed almost £15bn.’

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2888

Euro to Pound Sterling (EUR/GBP) Conversion Rate Predicted to Hold Steady despite Weak German Producer Prices

European economic data produced mostly disappointing results today. Of particular disappointment was January’s German Producer Price Index which declined beyond expectations on both an annual and a monthly basis.

However, the Euro failed to depreciate heavily in response thanks to trader risk-aversion and heightened demand for financer assets. This is due to concern that both Europe and the UK will lose out in the event of a ‘Brexit’. Also weighing on market sentiment are fears that no amount of stimulus measures from the People’s Bank of China (PBoC) will be enough to curtail China’s economic slowdown.

Yi Gang, a vice governor at China’s central bank, said today that the nation’s policy outlook should avoid being ‘too loose’ as it could significantly devalue the domestic currency. Excessive easing of China’s monetary policy could ‘lead to asset bubbles and depreciation of the Renminbi,’ Mr. Yi said.

The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.2822 during Friday’s European session.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: EU Summit Negotiations to Drive Volatility

Given the significance of the current EU summit and the UK’s negotiations for reforming the relationship with the European Union, any news from the event is likely to drive the Pound Sterling to Euro (GBP/EUR) exchange rate. Any news or comments from EU officials could be met with significant volatility. With that said, US inflation data could impact on the Euro thanks to negative EUR/USD correlation.

The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.2928 during Friday’s European session.