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Pound Euro (GBP/EUR) Exchange Rate Climbs on Traditional April Seasonality

Pound (GBP) Exchange Rates Up on Seasonal April Strength

The Pound Euro (GBP/EUR) exchange rate climbed on Friday, supported by traditional seasonal strength during the April period and rate hike hopes for the Bank of England (BoE) in May.

Sterling’s good fortune during the April period has lasted some 13 years, with the Bank of America Merrill Lynch describing it as the strongest seasonal trend amongst the majors and even going further to recommend a two-month option trade to capitalise on the predictable period strength.

This trend tends to correspond with the increase in incoming capital during this time of year, with dividend payments to British shareholders from foreign businesses and other general investment inflows marking the beginning of the UK’s financial year.

Beyond this, market anticipation for a rate hike from the Bank of England (BoE) continues to remain high, with recent hawkish comments from BoE Policymaker Ian McCafferty also driving demand.

Together, this rally sent GBP/EUR to levels not seen for over 10 months.

Euro (EUR) Exchange Rates Crippled by Cautious ECB Minutes

Another significant mover in the GBP/EUR exchange rate today was some rather dovish minutes from the European Central Bank (ECB) from their latest policy meeting.

These minutes revealed that policymakers continue to remain concerned over elements of growing trade protectionism around the world, with efforts by the US to achieve fairer trade potentially posing a risk to the bloc’s continued growth.

The minutes stated:

‘There was broad agreement among members that volatility in the exchange rate of the euro continued to be a source of uncertainty, which required monitoring with regard to its possible implications for the medium-term inflation outlook’.

On another note, policymakers observed that inflation is strengthening, but still remains insufficient, making the possibility of a rate hike still extremely unlikely for the foreseeable future.

Pound Euro (GBP/EUR) Exchange Rate Forecast: UK Inflation and Labour Market Stats at the Forefront

The market focus for the Pound Euro (GBP/EUR) exchange rate will soon shift to next week’s highly significant run of UK ecostats, including the UK’s unemployment, wage growth and consumer price inflation readings.

Not only will these figures paint a picture of the UK’s current economic conditions, they will also help the Monetary Policy Committee (MPC) decide if tighter monetary policy is warranted in May.

The UK’s inflation has eased slightly in recent months, but still remains above the central bank’s target range.

Unemployment continues to remain at record lows.

Wage growth has seen a steady acceleration, and could prove key in prompting a run of hawkish moves in the coming months.