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Pound Sterling to Euro Exchange Rate Forecast: GBP/EUR Hit Two-Month Best following Hawkish FOMC Comments

Declining UK Confidence Holds GBP/EUR Exchange Rate on Downtrend Today

After a weaker-than-expected UK GfK Consumer Confidence Survey, which unexpectedly slipped from 3 to 2, the GBP/EUR exchange rate has continued on a downtrend this morning in the region of 1.3932.


After being boosted overnight by the suggestion that the Federal Open Market Committee (FOMC) is considering a December interest rate rise, the GBP/EUR exchange is on a downtrend this morning following strong German unemployment data.

Slowed UK GDP Continued to Hold down Pound (GBP), Euro (EUR) Shrugged off News of Volkswagen Quarterly Loss

Although the German Consumer Confidence Survey and Import Price Index were shown to have weakened yesterday, with the latter contracting by a sharper-than-expected -4.0%, the single currency (EUR) remained on a relatively strong footing against rivals. Also failing to weigh down the Euro was the announcement that Volkswagen had made its first quarterly loss in fifteen years, as traders seemed to remain optimistic that the emissions scandal would not ultimately have too severe an impact upon the Eurozone’s powerhouse economy.

Sentiment towards the Pound (GBP) remained bearish following Tuesday’s disappointing third quarter UK GDP report, with a lack of domestic data during the day offering no particular incentive for investors to buy back into the softened currency. As the chances of a Bank of England (BoE) interest rate hike were naturally pushed back further into 2016 thanks to this weak showing, the prospects of Sterling remained muted.

Euro Currency News: Hawkish FOMC Statement Bolstered GBP/EUR Exchange Rate to Two-Month Best

Overnight the Federal Open Market Committee (FOMC) proved substantially more hawkish than expected, with strong hints that a December interest rate rise was still under consideration. As the US Dollar (USD) naturally jumped following the announcement, the Euro dived thanks to the negative correlation that exists between the currencies. With the chances of fresh monetary loosening measures from the European Central Bank (ECB) before the end of the year the increasing divergence between the policies of the central banks is starting to weigh on the outlook of the common currency. Consequently the GBP/EUR pairing was boosted to a two-month high of 1.3993.

Nevertheless, as the German Unemployment Change printed positively on Thursday morning the Euro has been taking back lost ground, pushing the GBP/EUR exchange rate into a downtrend. Unemployment in October was shown to have dropped by 5,000, indicating that the domestic economy remains robust in spite of recent slowdown concerns and the Volkswagen scandal.

GBP/EUR Exchange Rate Forecast: Euro may Gain further if Upcoming German Inflation Gauge Shows Improvement

Later today the German Consumer Price Index is expected to show that inflation within the Eurozone’s major economy improved on the year in October, with pundits anticipating a rise from 0.0% to 0.2%. Should inflationary pressure rise, this would offer some reassurance to the continued recovery of the Eurozone as a whole, potentially reducing the need for the ECB to loosen monetary policy in order to stimulate continued growth.

While tomorrow’s UK GfK Consumer Confidence Survey is expected to show an uptick on the month, this is not likely to particularly restore faith in the weakened Pound.

Current GBP, EUR Exchange Rates

At time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was retreating in the region of 1.3937, while the Euro to Pound Sterling (EUR/GBP) pairing was on an uptrend around 0.7177.