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Pound Euro Exchange Rate 2016 Forecast: Volatile Friday for GBP EUR

GBP EUR exchange rate outlook

  • Pound Euro Exchange Rate 2016 Above 1.16 – Strong UK retail data supports GBP EUR
  • Eurozone CPI Fails to Inspire Shared Currency – EUR holds its ground but struggles to advance
  • GBP Forecast: Uncertainty in Mid to Long Outlook – Sterling advances could be limited
  • EUR Forecast: When Will Euro Strength Return? – Lack of upward factors in Euro trade

Pound Euro Exchange Rate 2016 Briefly Holds Two-Month-High Before Falling on Friday

Towards the end of the week’s European session, the Pound extended its daily lows and at points was trending over a third of a cent lower in the Pound Euro exchange rate 2016.

GBP EUR gave up a portion of Thursday’s advances as Sterling was sold from its Thursday and Friday highs in a market bout of profit taking.

The Pound was also weighed down throughout the day by comments from German finance minister Wolfgang Schäuble, who stated that Britain may need to continue giving money to the European Union even after leaving the bloc.

(Previously updated 12:49 GMT 18/11/2016)

After advancing on Thursday evening thanks to the day’s strong UK retail sales figures, the Pound Euro exchange rate 2016 was able to reach the key level of 1.17 for the first time since mid-September.

However, while GBP EUR held above the level of 1.17 until Friday morning the pair slipped towards the middle of the day during a bout of Sterling profit taking. The British currency was sold off against the Euro and other major currencies from its best weekly levels, causing GBP EUR to slip back down to 1.16.

This was despite a lack of sturdy upward factors in Euro trade, meaning the Pound Euro exchange rate 2016 could flatten out again before the end of Friday’s European session.

(Published 07:00 GMT 18/11/2016)

The Pound Euro exchange rate 2016 trended flatly for most of Thursday’s session and is likely to continue this movement until the end of the week due to a lack of key data due for publication on Friday.

Throughout Thursday trade, GBP EUR appeared to be on track to end the week near the opening level of 1.16 despite briefly falling as low as 1.14 on Tuesday.

Pound (GBP) Struggles to Benefit from Surge in UK Retail Sales

The Pound largely held ground on Thursday after recovering from lows struck earlier in the week. While Sterling trended with an upward bias and did attempt to advance, demand was weighed down by yet more bearish Brexit forecasts.

Sterling was briefly bullish following Thursday morning’s UK retail sales report, which revealed that retail sales had been far better than expected in October.

Retail sales were up 2.0% in October, beating forecasts of 0.4%. Meanwhile, the year-on-year result of 7.6% smashed expectations of 5.4% and marked a considerable improvement from the previous figure of 4.0%.

What’s more, September’s previously stagnant retail sales result of 0.0% was adjusted higher to a less painful 0.1%.

Despite the impressive scores, many analysts expect this upward trend to slow and that an extended period of poorer sales could be ahead. Keith Richardson from Lloyds Commercial Banking stated;

‘This can’t last forever, and it may be that the threat of price rises in future is driving shoppers to the High Street now. The question now is how long retailers can hold back the rising tide of inflationary pressures while continuing to offer bargains around Black Friday and into Christmas. … The test is which retailers can find ways to keep offering bargains, even as their costs rise.’

Pessimistic forecasts like this and others weighed on Sterling demand throughout the day, preventing it from mounting a stronger advance.

Euro (EUR) Holds Ground on Mixed Eurozone Consumer Price Index

The Euro has largely weakened for most of the week, as concerns about rising populism in the Eurozone, as well as calls for more fiscal stimulus across the bloc from the European Commission, have weighed on demand for the shared currency.

Thursday’s key Eurozone data also didn’t paint an entirely clear picture on whether Eurozone inflation was recovering or worsening again.

October’s final Eurozone Consumer Price Index (CPI) failed to meet 0.3% expectations month-on-month, instead halving on September’s figure of 0.4%.

However, the year-on-year score was comparatively more optimistic, beating preliminary figures of 0.4% to score 0.5% as some analysts had forecast.

This was likely good news for the European Central Bank’s (ECB) battle against deflation too. Howard Archer, chief European economist at Markit stated;

‘We expect Eurozone consumer price inflation to trend higher over the coming months, particularly in late-2016 and early-2017.’

Ultimately, while various layers of uncertainty weighed on Euro trade, the shared currency was supported by yearly inflation and hopes that inflation would continue to climb next year.

Pound Euro Exchange Rate 2016 Forecast: GBP EUR Could See Flatter Trends for Some Time

Despite this week’s UK and Eurozone datasets having modest effects on currency trade, underlying trends and political factors in the Pound Euro exchange rate 2016 have kept the pair relatively flat since markets opened on Monday with little deviation.

With Friday’s only relevant data publications being Germany’s October producer prices and the Eurozone’s September current account scores, this movement could continue well until the end of the week.

However, political factors and central bank concerns could still alter GBP EUR exchange rates on Friday. The Euro could be influenced by a Friday morning speech from European Central Bank (ECB) President Mario Draghi as he speaks in Frankfurt for Euro Finance Week.

If Draghi makes any hints at the future of monetary policy, particularly in relation to last week’s shocking Trump US election win, the shared currency could see a significant shift in movement.

For example, any comments from Draghi showing confidence in current easing measures, lessening previous worries that the ECB would react to Trump market shock with additional stimulus, could relieve some downside pressure from Euro trade.

Other than that, the key factors acting on GBP EUR for the remainder of the week will be ongoing concerns about the mid to long-term effects on the UK’s Brexit vote, as well as fears of protectionism and populism rising in the Eurozone.

This could leave the Pound Euro exchange rate 2016 flat near the level of 1.16 until the end of the week, a movement that could easily continue early next week too.