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GBP/EUR Exchange Rate Forecast: US Consumer Confidence to Provoke Volatility

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Struggle on ‘Brexit’ Concerns

After last week saw the British Pound decline significantly following the tragic events in Brussels, analysts have noted that it is evidence of the Pound’s current sensitivity to a potential ‘Brexit’. With that in mind, there is every chance that the UK asset will continue to weaken irrespective of domestic data results.

However, today’s Nationwide House Prices for March may cause Sterling volatility. The previous reading showed that average house prices passed the £300,000 record, with expectations of further gains to come.

Rightmove director Miles Shipside said: ‘While the start of 2016 has seen an encouraging but modest uptick in the number of properties coming to market, demand and momentum have combined to push prices over £300,000. On average, 30,000 properties have come to market each week over the past month, up by 3 per cent on this time last year, but there are insufficient numbers of newly listed properties in many parts of the country to meet demand.’

Euro to Pound Sterling (EUR/GBP) Exchange Rate Predicted to Edge Higher despite ECB Easing Concerns

Analysts at Citibank stated last week that they predict the European Central Bank (ECB) to ease monetary policy further in September as inflation is not expected to pick up as swiftly as policymakers hope.

Therefore, this week’s German and Eurozone Consumer Price Indices will be of huge significance. If inflation fails to show any sign of picking up, or indeed if consumer prices decline, the Euro is likely to tank versus its major peers.

However, prior to the inflationary data, this afternoons US Consumer Confidence data has the potential to cause Euro movement thanks to EUR/USD negative correlation.

Last week’s hawkish sentiment from several Federal Reserve officials may also limit the appeal of the single currency. Several officials now believe that the time is ripe for a cash rate increase irrespective of US Dollar strength as economic conditions warrant tighter policy outlook. The potential for wider policy divergence between the Fed and the ECB will not aid demand for the common currency.

GBP/EUR Exchange Rate Forecast: ‘Brexit’ Uncertainty to Limit GBP/EUR Upside Potential

Although there is a good chance that the Euro will soften in the face of US Dollar strength and speculation of further easing from the ECB, the GBP/EUR exchange rate is still likely to hold a weak conversion. This is because the Pound’s sensitivity to ‘Brexit’ uncertainty has dominated, and will continue to dominate, trader focus.

With that said, a good result from US Consumer Confidence could push the GBP/EUR exchange rate higher, albeit likely to be temporary.