The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in a tight range on Monday as market attention focuses on Wednesday’s US Federal Reserve policy meeting.
The Pound Sterling to Euro (GBP/EUR) was trading in the region of 1.3947
With a lack of market moving economic data releases due out of both the UK and Eurozone, the currency pair is forecast to see little movement throughout the session. Data releases are also light from elsewhere with only US Industrial production data set to create some movement.
Sterling was weakened last week by the release of worse than forecast Construction output data and comments made by Bank of England governor Mark Carney. The BoE governor said that the recent rise in the strength of the Pound could lead to inflation levels remaining low, and could lead to the central bank leaving interest rates at a record low level for longer.
The Pound also continued to be under pressure from last week’s disappointing construction output data which showed that sector output fell by -2.6% at the start of the year. Economists had been expecting output to make an expansion of 1.2%.
GBP/EUR Exchange Rate Forecast to Move Ahead of US Federal Reserve Meeting
Earlier in the session, the Euro did find some support from concerns by Italy’s central bank governor and European Central Bank Governing Council member Ignazio Visco. At a speech delivered at the weekend, Mr Visco said that the Euro has fallen faster than expected since the ECB first suggested launching its quantitative easing programme.
‘Visco has been a factor this morning helping the Euro. The market is largely going to be quite quiet going into the Fed. The fear is that Federal Reserve Chair Janet Yellen may highlight the US Dollar as a factor in policymaking and this is a factor supporting position trimming into it,’ said a currency strategist at Citi.
Any hint that Fed policy makers are moving closer to hiking interest rates will likely boost the strength of the US Dollar and see the Euro and Pound both fall.
Sentiment towards the Euro remains under pressure due to the ongoing uncertainty over Greece’s future in the Eurozone. Last week, Euro area finance ministers rejected proposed economic reforms made by Athens, raising concerns that the nation could run out of money and leave the Eurozone.
The single currency could edge higher on Tuesday if Eurozone sentiment and inflation data comes in better than forecast.