Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Gains as Eurozone Economic Sentiment Dampens
The Pound Sterling to Euro (GBP/EUR) exchange rate advanced by around 0.3% on Tuesday morning.
Although British consumer prices data showed that inflation remained in negative territory for the second-consecutive month, the Pound advanced versus the majority of its most traded currency competitors. October’s Consumer Price Index met with expectations of -0.1% on the year, and 0.1% on the month. However, October’s Core Consumer Prices bettered the median market forecast 1.0% with the actual result rising to 1.1% on the year. Bank of England (BoE) Governor Mark Carney previously stated that the core inflation measure will be closely watched by policymakers and will inform decisions with regards to benchmark rate hikes.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.4259.
With the dreadful attacks in Paris still weighing on trader confidence, the shared currency continues to decline versus its currency rivals. Aiding the downtrend today was mixed results from domestic data erring towards negativity. Whilst the German Economic Sentiment Survey for November bettered the market consensus of 6.0, with the actual result reaching 10.4, November’s German ZEW Current Situation Survey dropped below expectations. Perhaps most significantly, in terms of the detrimental impact on Euro demand, was the Eurozone ZEW Economic Sentiment Survey which dropped from 30.1 to 28.3 in November.
Pound Sterling to US Dollar (GBP/USD) Conversion Rate Predicted to Trend within a Limited Range ahead of US CPI
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within a narrow range on Tuesday morning.
In response to the British inflation data, Ruth Miller, an economist at Capital Economics in London stated; ‘Price pressures are being influenced more by lower energy prices than by domestic economic weakness. It will take a long time for inflation to return to target’ and there is still ‘very little pressure’ for officials to raise interest rates soon.
‘In the absence of sharp movements in global commodity prices, inflation is likely to accelerate quickly beyond October as the direct impact of past falls in oil drops out,’ said Dan Hanson, an economist at Bloomberg Intelligence in London. ‘Evidence that this is happening is likely to be enough for the BOE to begin monetary tightening in May.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5209.
As traders await US inflation data, the Dollar is holding a position of strength versus its currency peers. This is mostly due to demand for safe-haven assets but also in response to Euro weakness. With the majority of analysts predicting that the Federal Reserve will hike the cash rate in December, the US Dollar is likely to continue trending strongly ahead of the decision. However, this could potentially pose a significant problem given that Federal Open Market Committee (FOMC) members have already highlighted USD overvaluation as a significant concern. A Fed cash rate increase will provoke significant USD gains so the FOMC will be weary lest overvaluation drags on economic progress.
Pound Sterling Forecast: EUR Weakness to Support Sterling Demand
Although Wednesday will see a complete absence of domestic data, the Pound is likely to hold a strong position against its rivals with Euro weakness supporting trade. With that being said, the UK asset may see volatility in response to a speech from Bank of England Deputy Governor Ben Broadbent.
Whilst the Euro is predicted to remain weak, the US Dollar is likely to hold a position of strength. Wednesday could see significant USD volatility with the publication of minutes from the Oct. 27-28 FOMC Meeting.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.4207 to 1.4273 today.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.5152 to 1.5217 during Tuesday’s European session.