- Sterling (GBP) Trades Strongly Into Weekend – Gains over 200 pips week-on-week
- Euro (EUR) Limp on Light Data – Greek debt relief prevents it from freefalling
- Forecast: What’s Next for ‘Brexit’ Debates? – UK observes bank holiday on Monday
- Forecast: Eurozone CPI Anticipated – German CPI on Monday, Eurozone inflation on Tuesday
The Pound Sterling to Euro (GBP/EUR) exchange rate headed into the weekend on a high after a week of impressive gains from the Pound as a result of lowered ‘Brexit’ bets and a quiet data week for the Eurozone.
While not quite re-reaching the three-month-high of 1.3215 it achieved last Wednesday, GBP/EUR was up over 0.2% on Friday afternoon after a stutter on Thursday, and trended in the region of 1.3140.
Pound (GBP) Exchange Rates Well Up After a Solid Week
The Pound strengthened across the board during last week’s trading session, making considerable gains against rivals like the Euro.
This was largely in response to new polls which indicated an increasing amount of support for the EU referendum’s ‘Remain’ campaign.
With less than a month until the historic vote, the strengthening support for a vote that may lead to a more certain future for Pound exchange rates left Sterling bullish.
Sterling’s uptrend was briefly halted during Thursday trading as investors reacted to mediocre data, including news that Britain’s Q1 Gross Domestic Product (GDP) had slipped from 2.1% to 2.0% year-on-year.
Q1’s business investment print also weighed on Pound sentiment as it was revealed business investment entered contraction for the first time in three years.
However, Pound sentiment remained strong into the weekend as ‘Brexit’ warnings from respected sources continued to be released, including a warning from Standard & Poor (S&P) that the Pound’s status as a reserve currency would be risked in the event of a ‘Brexit’.
Euro (EUR) Struggles to Make Inspired Movement on Light Data
The Euro slipped against many major currencies, including the Pound, last week as the relatively low amount of key data released was mixed.
PMI was slightly negative, with German scores being positive but Eurozone scores proving worse-than-expected. German GDP also printed as expected but economic sentiment was well down in both Germany and the Eurozone, according to a ZEW survey.
Ultimately, due to a bullish Pound, the German consumer confidence and IFO reports released last Wednesday were unable to leave the Euro stronger as it floundered in the latter half of the week.
Developments in Greece’s financial crisis briefly bolstered Euro appeal on Thursday. Markets reacted optimistically to news that the Eurozone’s deal with Greece could satisfy both Germany and the International Monetary Fund (IMF) – who had previously been at odds – with how to go forward.
News that Greece hoped to re-enter debt markets in 2017 also improved Eurozone confidence, but as the Eurozone’s own economy continues to see mixed movement, many investors remain wary.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Euro Could Lead Trade Next Week
With the Pound gaining considerably over the last week, markets will be left wondering if this height can be maintained or if it will drop in the coming week.
Britain observes a bank holiday on Monday, and as a result British trade will be quiet, allowing the Euro to take point with Germany’s highly anticipated preliminary May Consumer Price Index (CPI) results. These will be quickly followed up by general Eurozone scores on Tuesday morning.
Sterling could be left thoroughly uninspired during next week’s early trade unless statements or polls released in ongoing ‘Brexit’ debates inspire movement in the Pound despite a lack of data.
Less than four weeks until the key EU referendum vote, the pressure is on the ‘Remain’ and ‘Leave’ campaigns to present their best evidence and arguments to sway those on the fence.
Some analysts are expecting the ‘Leave’ campaign to procure an optimistic post-‘Brexit’ economic forecast, and a solid report could send the Pound plummeting.
UK economic data will be quiet until Wednesday’s session which sees the release of consumer credit, mortgage approvals and PMI Manufacturing reports. Construction follows on Thursday, with Services and Composite scores not released until Friday.
The Eurozone’s session is comparatively bustling to make up for last week’s quiet economic calendar. Tuesday’s Eurozone CPI is accompanied by Eurozone labour figures, which are currently expected to improve slightly.
However, the most pivotal event for GBP/EUR in the coming week could be Thursday’s European Central Bank (ECB) interest rate decision.