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Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Pound Trends Lower after Disappointing UK Employment Figures

‘Brexit’ Uncertainty Weighs on Pound Sterling to Euro (GBP/EUR) Exchange Rate Today

With no fresh UK data due out on Thursday the Pound (GBP) has been pushed lower, with traders increasingly concerned by the possibility of Prime Minister David Cameron failing to secure a deal with other European leaders ahead of the weekend. As a result the Pound Sterling to Euro (GBP/EUR) exchange rate was trending lower at 1.2831.


Following a somewhat disappointing raft of UK employment data, the Pound Sterling to Euro (GBP/EUR) exchange rate has struggled to make any particular gains today.

Mixed UK Inflation Data saw Pound Sterling (GBP) Exchange Rate Volatility

In spite of an initial boost on the back of a modest uptick in baseline inflation Pound Sterling (GBP) soon returned to bearish form across the board yesterday. Investors were discouraged by a larger than expected dip in the core Consumer Price Index, which printed at 1.2% rather than 1.3%, suggesting that wider trends in inflation were not as positive as might be hoped. As 0.3% annual baseline inflation is also significantly short of the Bank of England’s (BoE) 2% target the odds of near-term monetary tightening continued to diminish, dragging on the softened Pound.

The appeal of the Euro (EUR), meanwhile, was boosted as February’s ZEW Economic Sentiment Surveys showed that confidence in Germany and the wider Eurozone had not declined as far as expected. Although traders remain concerned by the economic outlook of the currency union this, alongside a fresh boost in risk aversion, saw the Pound Sterling to Euro (GBP/EUR) exchange rate trend sharply lower.

Euro (EUR) Exchange Rate Softened on Fears that ECB will Fail to Deliver on QE Expectations

Demand for the Pound weakened further this morning after the latest raft of UK employment data proved more mixed than investors had anticipated. While jobless claims fell, the ILO Unemployment Rate nevertheless failed to drop as forecast from 5.1% to 5.0%. Coupled with more disappointing wage growth this added to the conviction that the BoE will not act on interest rates for some months to come.

However, the single currency struggled to hold onto any gains today as the December Eurozone Construction Output showed a contraction both on the year and the month. Sentiment was equally dented by comments from European Central Bank (ECB) policymaker Ewald Nowotny, who seems to believe that market expectations for the central bank’s March meeting might be too high. Concerned that the ECB may fail to deliver on the promises of President Mario Draghi, traders have been quick to move away from the Euro, allowing the GBP/EUR exchange rate to make fresh gains.

GBP/EUR Exchange Rate Forecast: ‘Brexit’ Concerns to Push Pound Lower

‘Brexit’ uncertainty is likely to increasingly dominate sentiment towards Sterling in the coming days, though, as Prime Minister David Cameron attempts to secure agreement on reforms to the UK’s relationship with the European Union. Given that several countries have expressed intentions to oppose the reforms in their current state Cameron may fail to produce the means on which to base a June referendum. Further delays are likely to be to the continued detriment of the GBP/EUR currency pair.

Current GBP, EUR Exchange Rates

At the time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending narrowly around 1.2830, while the Euro to Pound Sterling (EUR/GBP) pairing was making gains in the region of 0.7794.