- Pound Sturdy as Week Ends – GBP/EUR ends higher thanks to ‘Super Thursday’
- Euro Fails to Recover Amid Mixed GDP – German GDP up, but Eurozone GDP down
- Forecast: UK CPI Due Tuesday – Key report to influence next week’s GBP/EUR movement
- Forecast: Quiet Week Ahead for Eurozone Data – Final April CPI due on Wednesday
The Pound Sterling to Euro (GBP/EUR) exchange rate traded mostly flatly on Friday after a volatile week and a bullish ‘Super Thursday’ left the Pound surprisingly higher on the week’s opening levels.
After gaining around 100 pips in response to the Bank of England’s (BoE) Thursday announcements, investors adjusted their positions and left GBP/EUR trading narrowly in the region of 1.2710 into the end of the week, almost 60 pips up from the week’s opening levels.
Pound (GBP) Gains Firm Footing after ‘Super Thursday’
With only relatively light construction output data releasing lower-than-expected during Friday’s session, Sterling was sent into the weekend by the slew of British news it enjoyed on Thursday.
The Bank of England’s (BoE) fourth ‘Super Thursday’ saw the central bank announcing its latest key rate decisions, as well as updating its quarterly growth forecast – which was reduced from 2.2% to 2.0%.
However, the lightened growth forecast was largely expected after news that British PMI had fallen across the board in April as a result of ‘Brexit’ fears negatively effecting business confidence ahead of the June referendum.
Sterling experienced a surprisingly bullish run on Thursday after BoE policymakers agreed unanimously to leave rates frozen – reflecting a confidence in the UK’s current economic direction despite ‘Brexit’ concerns gripping the nation.
However, the Pound’s run may have been slowed on Thursday night and Friday morning as major economic players including the BoE and the International Monetary Fund (IMF) issued their own ‘Brexit’ warnings.
According to the BBC, IMF Managing Director Christine Lagarde agreed with the possibility that the UK leaving the EU could lead to a technical recession, as well as saying she had not seen anything positive about a potential ‘Brexit’.
Euro Flat on Mixed Gross Domestic Product (GDP) Reports
The Euro experienced difficulty maintaining any ground on the Pound over the last week despite Britain’s ongoing economic concerns as a result of generally uninspiring Eurozone news throughout the week.
Following poor German industrial data on Tuesday and poor Eurozone industrial data on Thursday, the week’s positive reports were too weighed down by fears of Eurozone economic slowing to allow the Euro to advance.
These concerns were brought forward again during Friday’s session as investors responded with indifference towards a very mixed set of GDP reports.
While German GDP improved in all major prints, from 0.3% to 0.7% quarter-on-quarter and from 1.3% to 1.6% year-on-year, the positive reports were easily swept under the rug after general Eurozone GDP printed worse-than-expected.
Expected to hold steady in both quarterly and yearly prints, Eurozone growth drooped from 0.6% to 0.5% and 1.6% to 1.5% respectively, leaving the Euro flat as the week drew to an end.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Consumer Price Index (CPI) Next Week
GBP/EUR is likely to trade relatively flatly until Tuesday, when the UK’s highly-influential inflation data is published.
While Monday will see the release of the UK’s Rightmove house prices report, investors will likely continue to adjust their positions slightly until Tuesday’s session, which sees the release of Britain’s key April Consumer Price Index (CPI) reports.
Previously, UK CPI printed a score of 0.4% in March, and 0.5% in April 2015. Investors may be wary of the report as recent inflation forecasts have been bearish, but a positive result could see the Pound rallying further.
Conversely, falling consumer price pressures are likely to weigh on the Pound and could send the GBP/EUR currency pair lower.
On the other hand, next week’s economic calendar is set to be relatively quiet for the Eurozone, with no key data releasing until Wednesday’s final April CPI reports. Year-on-year CPI is currently predicted to contract at around -0.2%.