Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Weakness after Brussels Attacks
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending narrowly on Wednesday morning.
In the FX market, the tragic events that occurred in Brussels yesterday weighed most heavily on the British Pound. This is because those campaigning for the UK to leave the European Union have/will use these attacks to bolster claims that the UK is safer outside the EU.
The attacks in Brussels could impact the so-called “Brexit” referendum in June, said Nandini Ramakrishnan, global market strategist at JPMorgan Asset Management. ‘An event like today certainly does push the case for certain campaign language for the UK to leave the EU a bit further.’
Adding to Sterling headwinds today is Mayor of London Boris Johnson who is currently answering questions regarding his pro-‘Brexit’ stance. Johnson has already stated that pro-EU opinions within City of London financiers are ‘much less strongly held than you might imagine’.
With a complete absence of domestic data to provoke changes, the British Pound is likely to continue to hold a weak position versus its major peers. Later today Bank of England (BoE) policymakers will meet for the last time ahead of the June 23rd EU referendum, in which the risks of a ‘Brexit’ will likely be discussed in detail.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2662.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Hold Gains ahead of Eurozone Consumer Confidence
The attacks in Brussels also heavily affected demand for the Euro. However, the single currency held gains versus the British Pound with political uncertainty dominating trader focus.
The US Dollar’s comparative strength, thanks to heightened demand for safe-haven assets, also limited the appeal of the shared currency. With many economists predicting that the Federal Reserve will be forced into tightening policy irrespective of USD overvaluation, the prospect of widening central bank policy divergence is likely to provide more Euro headwinds.
Speeches from European Central Bank (ECB) officials Sabine Lautenschlaeger and Jens Weidmann will be closely watched by traders today. ‘After ECB chief economist Praet was out last week stressing that rate cuts remain part of the ECB toolbox, the other German members of the ECB Governing Council will be listened to for any clues regarding ECB preferences for QE versus rates if more easing is needed from here,’ stated the research team at Danske Bank.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.2645 during Wednesday’s European session.
GBP/EUR Exchange Rate Forecast to Hold Losses Irrespective of Domestic Data Results
Although Eurozone consumer confidence data has the potential to cause changes for the GBP/EUR exchange rate, the major political uncertainty weighing on demand for Sterling will likely overshadow ecostats.
Thursday could see increased volatility, however, with several Eurozone and British economic data publications due for release. The ECB’s economic bulletin and the German GfK Consumer Confidence survey will both be closely watched by Euro traders.
In terms of British data, Retail Sales and Loans for House Purchase will be most closely watched. However, it is fair to say that political uncertainty may continue to overshadow data results.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.2686 during Wednesday’s European session.