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Pound Euro Exchange Rate Forecast: GBP/EUR Falls Towards 1.15 on Article 50 Speculation

As the weekend approached the Pound Euro (GBP EUR) exchange rate edged slightly lower, falling from the week’s high of above 1.16. The Euro strengthened further into Friday’s session amid expectations for next week’s busy Eurozone economic calendar.

  • Pound Euro (GBP EUR) Exchange Rate Fluctuates – Soars higher on Thursday
  • 6k Less UK Jobless Claims in July – Brexit vote unlikely to have hit employment sector yet
  • UK Retail Sales Don’t Show Brexit Impact – Sterling surges on results
  • Eurozone Inflation and ECB Minutes Mixed – But Euro holds ground
  • Forecast: Will Sterling Continue to Slip Next Week? – Article 50 worries weigh on advances

Pound Euro Plunges Friday Afternoon Amid Article 50 Speculation

The Pound to Euro exchange rate fell well below its weekly best levels on Friday afternoon, as any attempt from Sterling to hold its ground following its Thursday rally was undermined by fresh speculation about the activation of Article 50.

Article 50 is the trigger that begins the formal Brexit process. On Friday afternoon, a report was published that two unnamed UK officials had heard UK Prime Minister Theresa May was sympathetic to the possibility of activating Article 50 before April 2017.

While this report was disregarded as false by Downing Street officials shortly afterward, it was enough to pull the rug from under Sterling’s advances, causing GBP/EUR to fall back below 1.1550 as the European session came to an end.

The Euro is likely to drive GBP/EUR movement next week, beginning with Tuesday’s key preliminary Eurozone PMIs for August.

(Previously updated 13:39 BST 19/08/2016)

The Pound remained in a considerably stronger position than it was earlier in the week when concerns relating to the Bank of England’s (BoE) stimulus measures saw the GBP EUR exchange rate fall all the way to a new three-year low of 1.1472 – over 16 cents lower than the 1.31 figure struck on the evening before the results of the referendum were announced.

The Pound Euro (GBP/EUR) exchange rate recovered from its worst levels in over three years as the week continued, rebounding from 1.14 to trend comfortably at 1.1550. Following the release of the UK’s retail sales figures for July, Sterling surged higher still against the common currency. GBP EUR rallied by over 0.6% as concerns that the UK’s decision to Brexit from the European Union would result in the UK entering recession eased somewhat.

So far ecostats have pointed at the UK economy contracting 0.4% in the wake of the June 23rd vote, but employment, inflation and retail sales figures have all been largely upbeat.

Pound Euro Rates Hold Just Below Daily Highs after Eurozone Data

After hitting a high of 1.1635 on Thursday morning, its highest levels so far this week, the GBP/EUR exchange rate edged lower slowly throughout the day. The pair was able to hold its ground above the key level of 1.16 however.

The Euro was given firmer ground to stand on on Thursday afternoon, as the day’s Eurozone data confirmed that inflation, while very low, was at a positive 0.2% year-on-year in July.

This, alongside the European Central Bank’s (ECB) July meeting minutes, left Eurozone investors cautiously optimistic on Thursday.

The Eurozone’s recovery remained slow, but the ECB indicated in its July report that it was not in a hurry to introduce further easing measures and would wait for further data before acting.

(Previously updated 11:27 BST 18/08/2016)

Surging Retail Sales Banish Brexit Fears and Send Pound Euro Exchange Rate Higher

The GBP EUR exchange rate jumped to 1.1614 following the release of the UK’s retail sales figures for July. The Pound gained across the board as spending jumped 1.5% on the month and 5.4% on the year, smashing respective forecasts of 0.1% and 3.9%.

While Pound Euro leapt 0.6%, Sterling’s gains against the US Dollar were even more impressive and GBP USD achieved a high of 1.3159.

Joe Grice of The Office for National Statistics (ONS) commented: ‘These are strong numbers showing a pronounced increase in sales compared with last July. Better weather this year could be a major factor with sales of clothing and footwear doing particularly well. There is also anecdotal evidence from respondents suggesting the weaker pound has encouraged overseas visitors to spend. Department stores and specialist retailers like jewellers are among those reporting a good month.’

(Previously updated 08:00 GMT)

GBP/EUR gained around half a cent on Tuesday to fluctuate above the key level of 1.15, but was unable to recover as far as Monday’s high of 1.1596. Regardless, the pair was still up on its three-year-low of 1.1472.

Pound (GBP) Holds Recent Gains Thanks to UK Data

Tuesday’s UK Consumer Price Index (CPI) report may not have been a bumper dataset, however the higher-than-expected inflation score of 0.6% was enough to prompt investors to buy the Pound from its cheapest levels.

This caused Sterling to make a solid recovery across the board, climbing to around the week’s opening levels against the Euro and reversing some of its Monday losses.

Wednesday’s employment data supported the Pound slightly, allowing it to tread water and preventing potential drops.

Britain’s employment change from April to June was a higher-than-expected 172k. This data was collected before the UK’s vote to Leave the EU, meaning it does not reflect any post-Brexit shifts.

That said, July’s jobless claims report didn’t really indicate any Brexit vote affects either. The claimant count came in at 2.2% as expected, but the amount of new jobless claims made throughout the month was 8.6k less than the previous month.

However, as the Office for National Statistics (ONS) indicated that the job market is unlikely to show any Brexit vote-influenced trends for at least a few months, investors were hesitant to push the Pound up too high.

Euro (EUR) Movement Limited Ahead of Inflation Data

The Euro continued to trend with a slight upward bias on Wednesday, but found it difficult to push the Pound back down to its earlier lows due to a lack of key data for investors to react to. As a result, investors found themselves focusing largely on the Pound and US Dollar.

Regardless, the Euro and Eurozone continued to enjoy solid market sentiment as the week progressed, following recent indications that the Eurozone’s economy had been resilient to potential Brexit effects and that the currency bloc’s economic recovery will continue.

According to a report from Bundesbank published earlier in the week, the European Central Bank (ECB) had stated in July that the Brexit vote had not taken the bank’s Eurozone recovery measures off track.

Amid low interest rate hopes for the US, and increasingly low Pound yields, the Euro continued to see demand ahead of Thursday’s key session.

Pound Euro (GBP EUR) Exchange Rate Forecast: Will GBP EUR Fall Back Towards Lows Today?

While the Pound to Euro exchange rate had fluctuated as high as 1.1589 on Wednesday, it may be unlikely for the pair to recover to levels of over 1.16 unless Thursday’s UK data comes in well above expectations.

Analysts had not expected this week’s inflation and jobless figures to indicate any insightful post-Referendum trends – and they didn’t.

However, some analysts have said that Thursday’s UK July retail sales report is a lot more likely to show some kind of immediate impact from the decision.

It has been suggested that Britain’s Brexit vote may have shaken consumer spending amid domestic uncertainty. As a result, it will be vital to see if today’s retail sales report defies expectations in some key way. The report has the potential to influence Sterling movement for the remainder of the week.

Over in the Eurozone, Thursday will see the publication of the currency bloc’s July inflation figures. Inflation is expected to have contracted from 0.2% to -0.5% over the month, but if the report prints higher it could boost the Euro.

Investors will also likely pay close attention to the European Central Bank’s (ECB) latest monetary policy meeting minutes. The bank’s last decision meeting was in July, and these minutes will go into detail on the bank’s thoughts at that point in time.

If the bank’s officials express confidence in the Eurozone economy in the report, it could be seen as an indication that the bank is holding off on further easing measures which would drive the Euro higher. On the other hand, a dovish stance could allow the Pound Euro (GBP EUR) exchange rate to advance.