Homepage » News » EUR/GBP » Is the Pound Sterling to Euro (GBP/EUR) Exchange Rate’s Weak Streak Forecast to Continue?

Is the Pound Sterling to Euro (GBP/EUR) Exchange Rate’s Weak Streak Forecast to Continue?

Pound coins and banknote.

The Pound Sterling to Euro (GBP/EUR) exchange rate was unable to sustain growth last week, plummeting as Friday drew to an end with the main causes being a record high deficit and the potential loss of thousands of UK steel industry jobs.

Sterling Down Across the Board as Domestic Concerns Grow

The Pound took a series of considerable hits throughout last week after beginning the week on a positive note. The currency had been appealing to USD investors looking for light bank holiday trade sessions to minimise their losses amid poor US data.

The good news did not last for Sterling however as the GBP/EUR pair slipped to a new low 16-month-low on Friday afternoon, having fallen well over 250 pips over the course of the week from a high 1.2763 on Tuesday.

The primary reason for the bearish trend is thought to be widespread investor disappointment in the future outlook of the UK economy.

Warnings of economic uncertainty from the Bank of England (BoE) were worsened when Indian Steel production company, Tata Steel, proposed to withdraw their UK operations due to daily losses of £1m and a perceived lack of economic stability in Britain going forward.

Towards the end of the week, investors had also been shocked by new current account deficit figures. The UK’s overall deficit had worsened from -£21.2b to a frightening -£32.7b, far worse than forecasts and also the highest UK deficit since records began in 1948.

Optimistic Eurozone Data May Have Weighed down Pound (GBP)

A series of factors have led to the Euro’s strength as of last week’s final session, including strong Eurozone data.

Overwhelmingly positive German CPI seems to have instilled a little more long-term confidence in Euro investors as they believe a higher rate of inflation in the Eurozone’s largest economy is likely to dissuade the European Central Bank (ECB) from introducing further easing methods.

Relatively underwhelming Eurozone CPI and German unemployment data does not seem to have weighed much on the Euro either, as investors seem eager to settle on the shared currency in comparison to the currently unappealing US Dollar.

The US Dollar suffered versus many of its biggest rivals last week after the Federal Reserve reminded investors that it would maintain a dovish outlook to interest rate hikes.

Seeming reliable in the immediate future, despite ECB warnings of further potential easing, investors currently favour the Euro and the positive data from the Eurozone economy.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Sterling Recovery Increasingly Difficult?

Factors continue to weigh on the Pound going forward. With ‘Brexit’ concerns forecast to continue, making investors unsure of how the currency will move in coming weeks and months, the ongoing Tata Steel crisis also seems unlikely to reach a satisfying conclusion for the UK’s economy.

Last week, many analysts and investors expected prompt action to be taken to protect the UK’s steel manufacturing industry in order to save over 15,000 jobs.

Unfortunately, the situation was still ongoing by the end of last week’s session and the Conservative government had come under criticism for its inaction on what has been perceived to be a massive job risk for the British economy.

UK Prime Minister David Cameron has already expressed discomfort with the idea of Nationalising Tata Steel UK, making the only other obvious options selling the business or closing the business entirely and losing thousands of jobs.

Various important data prints are due for release this week, though analysts predict that these are not as likely to inspire influential GBP/EUR movement as last week’s releases.

Composite PMI, Industrial Production and Trade Balance figures will be released from Britain throughout the week, with a new unofficial GDP estimate being published by NIESR this Friday.

The Eurozone, on the other hand, will see the release of Sentix investor confidence and various PMI figures as well as German factory orders, industrial production and trade balance.

The European Central Bank will also be releasing an account of the latest monetary policy meeting which is likely to sway investor sentiment depending on the tone adopted.