Brexit Negotiation Progress – What can we expect for the GBP/EUR Exchange Rate?
The performance of the Pound Euro (GBP/EUR) exchange rate next week will largely be driven by Brexit-related soundbites, with UK Prime Minister Theresa May expected to meet with her Cabinet before detailing her position and any progress that has been made in a speech.
This speech should reveal what was discussed last week during the PM’s meeting with 11 senior Ministers in Chequers, with markets only currently operating on the knowledge that ‘divergence has won the day’ and mutual recognition that the UK will not remain within the customs union after Brexit has occurred.
In this respect, the speech could detail the UK’s plans to achieve ‘frictionless trade’ though another means, with a greater degree of clarity liable to renew business investment and give Sterling a shot in the arm.
Beyond this, any progress made on the Brexit transitionary front could prompt a hawkish move from the Bank of England (BoE), especially after members of the Monetary Policy Committee (MPC) claimed that success securing a transitionary deal would be a deciding factor for an earlier-than-expected rate hike.
EUR Exchange Rate Forecast: Draghi Speech and Feb CPI Estimates Ahead
The single currency (EUR) could see some volatility next week depending on the result of a variety of notable ecostats and events on the calendar.
This includes a speech from European Central Bank (ECB) Governor Mario Draghi on Monday, private sector sentiment readings on Tuesday, February’s CPI estimate on Wednesday, the bloc’s unemployment rate on Thursday, and finally; Germany’s retail sales on Friday.
With inflation in the bloc disappointing in last week’s reading it is unlikely that Draghi’s speech will be optimistic – it is also entirely possible that he could skirt around the subject of monetary policy entirely, however.
February’s CPI flash estimates for February are also not expected to be positive, with inflation in the bloc now forecast to remain soft for the near-term, and bank policy also largely expected to remain on hold.
UK Ecostats on the Horizon – GBP/EUR Exchange Rate Forecast
Beyond Brexit, other significant drivers for the Pound Euro (GBP/EUR) exchange rate next week will be a range of pertinent ecostats for the UK.
This will include the UK’s Nationwide house price readings and consumer confidence figures on Tuesday, Thursday’s net consumer credit print and manufacturing PMI reading, and Friday’s construction PMI.
It should be stressed, however, that Sterling continues to remain under the thumb of Brexit-related soundbites, with these ecostats expected to play second-fiddle to Theresa May’s speech and any news that could point to a secure transition deal.