- Pound Euro Forecast to Remain Above 1.11 – Hovers above 1.12 on Wednesday
- Euro Boosted by ECB Speculation – As well as decent Eurozone inflation stats
- British CPI Spikes to 1.0% – BoE warns on inflation caused by GBP value
- Forecast: ECB Takes Spotlight on Thursday – Will bank taper QE as speculated?
Pound Euro Forecast Largely Unchanged after Wednesday Trade
As Wednesday’s European session came to an end, the Pound Euro forecast seemed little changed as the day’s news and economic publications did little to influence GBP EUR exchange rates.
The morning’s UK employment stats gave Sterling a little support and helped the currency hold its Tuesday advances, but Euro trade was too flat to take much value back anyway as markets lost excitement towards Thursday’s ECB meeting.
If the ECB does happen to hint at a winding down of stimulus in Thursday’s decision, the Euro will soar. However, this is being regarded as highly unlikely by analysts. It is more likely the ECB will take a vaguely optimistic stance, which may leave the shared currency weaker or simply uninspired.
The Euro may also be affected by strength of the US Dollar on Thursday, as markets react to the final US Presidential debate being held on Wednesday night.
(Previously updated 12:41 BST 19/10/2016)
Wednesday morning’s British employment stats have offered some support to this week’s Pound Euro forecast, assisting Sterling in holding the gains it made in Tuesday’s session.
GBP EUR continues to hover near 1.20, almost a cent above the week’s opening levels. British employment stats didn’t boost Sterling significantly, but markets were slightly cheered by news that Britain’s employment rate had reached a joint-record-high of 74.5%.
(Previously updated 16:35 BST 18/10/2016)
Pound Euro Forecast to End Week Higher unless ECB Impresses
Tuesday’s session has had a strong effect on this week’s Pound Euro forecast, as comments made during a High Court hearing on the activation of Article 50 have led the UK government to reveal something that markets are quite happy with.
UK markets had previously been concerned that the Brexit process was becoming an entirely government-controlled affair, but on Tuesday the UK government indicated that it was ‘very likely’ there would be an MP vote on the terms of a Brexit towards the end of negotiations.
The BBC reported;
The government is currently fighting a legal case over whether Parliament should have a vote before Article 50 is triggered.
During the High Court hearing, government lawyer James Eadie QC moved on to what was likely to happen at the end of the negotiations, in 2019, saying: “The government view at the moment is it is very likely that any such agreement will be subject to ratification.”
As a result, GBP EUR surged and at some points was around a cent higher in value. As it stands, the exchange rate is on track to end the week higher but Sterling could still be undermined by disappointing Brexit news. The Euro could also surge on Thursday if the ECB indicates it will taper any of its easing programs sooner-than-expected.
(Previously updated 12:38 BST 18/10/2016)
The Pound to Euro exchange rate was able to advance on Tuesday morning, continuing an uptrend started on Monday night and slightly bolstered by Britain’s latest inflation report after all.
September’s inflation scores came in above expectations, jumping from 0.6% to 1.0% year-on-year due to higher prices for clothing, hotel rooms and petrol.
As the Office for National Statistics (ONS) report indicated that Sterling’s drop in value had not yet had a strong effect on these consumer prices, Sterling was able to recover.
(Published 07:00 18/10/2016)
Tuesday’s Pound Euro forecast is focused largely on how markets react to Britain’s September Consumer Price Index (CPI) scores, as inflation is typically a highly anticipated trade-point. With the BoE having warned on weak-GBP-influenced inflation, Sterling may struggle to capitalise.
GBP EUR trended largely flat last week and by the end of the week was trending just 10 pips above the week’s opening levels at 1.11. The pair slipped below 1.11 again on Monday, but despite the day’s data largely continued with last week downward bias.
Pound Limp Once Again as GBP Remains Uninfluenced by UK Data
Monday’s session largely continued last week’s uneventful Sterling trend. Once again, the Pound floundered throughout the day amid a lack of inspiration in UK markets, while the day’s data once again failed to influence GBP levels.
While the day’s data wasn’t exactly high influence, Rightmove’s October house prices report continued a trend of UK data improving and indicating that Britain’s economic activity since the Brexit vote had been solid. House prices improved from 4.0% to 4.2% year-on-year.
Indeed, Sterling’s value continued to indicate that it was Britain’s long-term economic performance markets were anxious about, as the current outlook remains solid despite the Brexit vote briefly giving markets jitters in July.
Bank of England (BoE) Deputy Governor Ben Broadbent even stated that Sterling’s low value could act as a cushion to the economy, in a Monday interview with BBC Radio 5;
‘Having a flexible currency is an extremely important thing, especially in an environment when your economy faces shocks that are different from your trading partners.
In the shape of the referendum, we’ve had exactly one of those shocks. Allowing the currency to react to that I think is a very important shock absorber.’
Despite ongoing confidence in the UK’s current economic activity, Sterling has continued to trend near its worst levels across the board on fears of what will happen after a ‘hard Brexit’.
Euro (EUR) Bolstered by Inflation Stats and ECB Speculation
After trending poorly for most of last week due to a surge in demand for the US Dollar, the Euro sprang forth on Monday, initially surging due to speculation on the European Central Bank’s (ECB) meeting later this week before solidifying its gains due to the latest Eurozone inflation stats.
September’s Eurozone Consumer Price Index (CPI) met preliminary scores. While no change on the initial estimates had been expected, the fact the initial preliminary figures had originally beat expectations continued to cheer investors.
This meant that price pressures improved at 0.4% month-on-month and year-on-year, taking yearly inflation further away from stagnation.
Market speculation on the ECB’s potential Thursday decisions has had a strong effect on Euro trade since last week.
Some have suggested that the bank will hint at tapering back its quantitative easing program and returning to more normalised monetary policy as the effectiveness of ultra-eased policy is rumoured to be increasingly doubted among top-level bankers.
Excitement at this possibility, as well as expectations of a more optimistic ECB meeting, has seen investors piling into the shared currency this week.
Pound Euro Forecast: Tuesday’s UK Inflation Stats May Not Influence Exchange Rates Much
Markets will be focused on Britain’s September inflation results, at least to begin with, on Thursday.
It has long been speculated that Sterling’s plummet in value since the Brexit vote would affect high street prices and after Marmite was spread all over UK headlines last week it appears this is finally starting to happen.
A row had emerged between Tesco and Unilever over prices of Unilever’s products due to the value of the Pound. Unilever supplies many household brands, such as Marmite and Pot Noodle.
While the row was quickly resolved, it revealed the reality of Sterling’s plummet in value: UK consumer prices would eventually surge.
The Bank of England (BoE) knows this too and as a result has reminded markets that it will ignore any surges in inflation caused by Sterling’s plunge. This means that even if CPI scores solidly in Tuesday’s September prints, investors will not adjust BoE monetary policy bets and GBP may even remain limp.
The Euro could continue to strengthen in the coming days as Thursday’s European Central Bank (ECB) meeting approaches. If the bank does in fact hint that its QE programme is headed to an end, the Euro could surge towards the end of the week. If not, the Pound Euro forecast could finally see some upside.