- Pound Euro 2016 Forecast: Is 1.13 in Sight? – Brexit trade hope pushed GBP EUR above 1.12
- European Central Bank (ECB) Meeting Leaves Euro Weaker – Stimulus extension speculated for December
- Eurozone PMIs Impress on Monday – Eurozone economic activity up in October
- Forecast: British Q3 Growth Results on Thursday – May not inspire if Brexit news weighs
Pound Euro 2016 Forecast to Recover from Tuesday Drops
Despite trending sturdily on Tuesday morning, the Pound to Euro exchange rate plunged on Tuesday afternoon as markets responded to comments from UK Chancellor Philip Hammond.
Hammond stated that the British government saw no reason to reject future monetary easing from the Bank of England (BoE). Hammond’s comments that the Pound’s value would cause a surge in inflation also weighed on the Pound.
Sterling’s drop was also attributed to an anticipated testimony from BoE Governor Mark Carney.
The Pound could recover from these drops in the coming days as investors buy the currency from its lows or if Thursday’s British growth stats beat expectations.
(Previously updated 12:34 BST 25/10/2016)
The Pound Euro 2016 forecast was little changed by Tuesday morning’s Eurozone data, despite scores once again beating expectations in every print.
Germany’s October business confidence scores from the IFO came in strongly, with the business climate improving to 110.5 and expectations rising to 106.1 despite being expected to remain at the same level.
This indicated to markets that German businesses had shaken off any jitters from the UK’s Brexit vote in June. Despite this, GBP EUR continued to trend flatly as Sterling continued to be buoyed by key support levels.
(Previously updated 16:32 BST 24/10/2016)
Pound Euro 2016 Forecast Higher if Upcoming Eurozone Data Disappoints
Monday’s session seemingly proved that there are too many factors weighing on Euro trade for the currency to be bolstered by solid Eurozone data at this time. These factors include ECB easing bets and a strong US Dollar.
Markit’s preliminary October PMIs for the Euro bloc came in above expectations in every print. Manufacturing improved from 52.6, surpassed projections of 52.7 and scored 53.3 while services improved from 52.2 to 53.5. The overall composite score improved from 52.6 to a solid 53.7.
While Euro trade remained weak throughout the day, Sterling slipped at various points in the afternoon due to a lack of supportive news.
Weakness in the Euro while Sterling holds its ground indicates that if this week’s Eurozone data disappoints, such as Tuesday’s German confidence scores from IFO, GBP EUR could continue to recover.
(Previously updated 12:50 BST 24/10/2016)
Pound Euro 2016 Forecast to Trend Flatly on Monday
Monday morning’s Eurozone economic stats did little to influence the Pound Euro 2016 forecast, as GBP EUR continued to trend near Friday’s highs throughout the morning.
The Euro continued to be pressured by last week’s European Central Bank (ECB) news, despite the morning’s impressive preliminary October Eurozone PMIs from Markit.
Among the most impressive stats was confirmation that France’s manufacturing sector had finally escaped contraction, scoring 51.3 in the preliminary score.
German services also rebounded from their poor September performance, on track to hit a higher-than-expected 54.1 in October.
(Previously updated 8:55 BST 24/10/2016)
The Pound Euro 2016 forecast could see a slight improvement if Eurozone news fails to impress this week, as investors begin to expect an extension to the European Central Bank’s (ECB) quantitative easing program after last week’s meeting.
GBP EUR gained around a cent in value last week, beginning the week at near 1.11 and advancing to over 1.12 by Friday. The Pound’s biggest advance came on Tuesday, as markets grew hopeful that MPs would be able to vote on a Brexit deal that favoured trade.
This marked a bit of a turnaround for the British currency after a sustained run of losses, with the Pound also recording gains against peers like the US Dollar, Euro, Canadian Dollar and Australian Dollar over the course of the week. But can Sterling’s rally continue?
Pound (GBP) Sustains Weekly Gains Despite Underwhelming Data
Last Tuesday Sterling surged against most other major currencies thanks to statements made by UK government officials, indicating that MPs would likely be able to vote on any final Brexit agreement before it is put into law at the end of Britain’s two year leaving negotiations.
This took Sterling to new levels of key psychological support which helped the currency hold its ground for most of the week, despite a slew of mixed economic data.
Thursday’s UK retail sales scores came in well below expectations in every major print, while Friday’s public sector net borrowing scores revealed a bigger borrowing deficit than expected. Borrowing came in at £10.118b. Thomas Pope from the Institute for Fiscal Studies stated on the report;
‘At the half way point in the financial year, tax receipts have disappointed while central government spending has been slightly lower than official forecasts for the year imply. Overall, borrowing looks set to be higher than the OBR forecast in March, possibly by a reasonable margin. The trend so far suggests that, over the year as a whole, receipts could undershoot by £14bn.’
Speculation that Britain’s economic data is having increasingly little effect on Sterling trade continued to be entertained my markets throughout the week, as Sterling trended near the levels achieved in its Tuesday rally and only saw limited shifts in response to the week’s ecostats.
Euro (EUR) Strength Undermined as European Central Bank (ECB) Hints at December Plans
The Euro had been trending rather sturdily for most of last week’s trade despite taking some hits from Sterling’s Tuesday rally, as investors continued to cling to hopes that the European Central Bank (ECB) would take a more hawkish than expected tone in its October meeting.
No such tone came. The bank mostly echoed its September meeting, keeping monetary policy frozen and reminding markets that its stimulus programs would stay in effect until March 2017 but could be extended if necessary.
The Euro’s movement since Thursday was largely due to comments made in ECB President Mario Draghi’s following press conference.
The shared currency briefly surged on Draghi’s confirmation that the ECB had not discussed extending its quantitative easing program, but slipped quickly back down when Draghi also confirmed that the bank had not discussed tapering QE either.
Ultimately, the Euro was left limp as investors edged away from the currency following hints that the bank would discuss extending QE in its December meeting.
Pound Euro 2016 Forecast: Euro to Inspire Exchange Rate Movement Unless Brexit News Surprises
Next week will see another relatively quiet UK economic calendar, but after last week’s slews of UK data scarcely left a solid imprint on Pound movement that may not matter much for the Pound Euro 2016 forecast.
Instead, Sterling is more likely to be influenced by currency cross flows and Brexit news as it has done for the last month. Any new hopes that access to the European Union’s single market can be somewhat salvaged in a post-Brexit Britain will be the most possible supports for a Sterling advance.
The week’s British data is largely low-influence regardless, though Wednesday’s BBA loans for house purchases report for September may give the currency some support if it impresses.
The main event for British data next week is sure to be Thursday’s Q3 Gross Domestic Product (GDP) results, which will be a good all-round indication of how Britain’s economy has performed since the Brexit vote.
This may not influence Sterling value all that much however as economists have already reached a consensus that the Brexit vote itself did not shock Britain’s economic activity as much as expected.
It’s much more likely that the Euro will drive GBP EUR exchange rate movement in the coming week, as Monday morning will start the week off with the Eurozone’s preliminary October PMIs from Markit. These will be the first big indicator of Eurozone economic activity throughout the month.
If these Eurozone PMIs impress it could stoke hopes that the European Central Bank (ECB) will avoid extending its QE measures. If they disappoint however, the Pound Euro 2016 forecast could increase further next week.