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British Pound to Euro (GBP/EUR) Exchange Rate Forecast to Dive after Dovish Federal Reserve Minutes

GBP/EUR Conversion Rate Predicted to Soften after UK Data Missed Estimates

The Pound Sterling to Euro (GBP/EUR) exchange rate declined by around -1.0% on Friday afternoon.

After the Bank of England (BoE) opted to hold the cash rate the Pound softened versus its major peers. The accompanying minutes showed that policymakers were reluctant to hike the cash rate with a complete absence of inflationary pressure. The Pound saw greater losses in response to minutes from the most recent Federal Open Market Committee (FOMC) interest rate decision meeting. FOMC members showed a reluctance to even consider hiking the benchmark interest rate with global economic growth slowing. Given that the BoE are unlikely to hike the lending rate ahead of the FOMC, demand for the Pound remains damp on Friday morning.

Additional Sterling losses can be attributed to less-than-ideal domestic data. August’s Construction Output contacted on both a monthly and annual basis. August’s Visible Trade Balance, Trade Balance non EU and Total Trade Balance all saw the deficit narrow, but all failed to meet with the respective market consensuses. Previous figures had been negatively adjusted, however, which means that August’s trade was slightly more positive than the headline figures suggest.

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3466.

EUR/GBP Exchange Rate Forecast to Climb on Bearish US Dollar

In contrast to the Pound, the common currency strengthened in response to the dovish FOMC minutes. With the US Dollar trending in a weak position, the shared currency advanced thanks to negative correlation. The prospect of long delays to tighter Federal Reserve policy is also a positive for the Euro. With the European Central Bank (ECB) considering stimulating price pressures in the Eurozone, loose policy from the US makes it easier for the Frankfurt-based central bank to act.

With a complete absence of domestic data today, the single currency will see movement in response to changes in market sentiment and US Dollar volatility. Given that the EUR/USD is the world’s most traded currency pairing, any US Dollar movement will impact the Euro.

The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3450 today.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Losses Irrespective of US Data

Although there is US Wholesale data due for publication on Friday afternoon, there is a high likelihood that the single currency will be little affected. This is due to the fact that the US data isn’t particularly high weighted economically and damp sentiment towards the Fed is likely to overshadow domestic data anyway. With an absence of further British economic data to provoke changes, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to hold losses for the remainder of Friday’s European session.

Next week will see significant GBP/EUR volatility as there are several influential domestic data publications scheduled for release. In terms of British data, Tuesday’s Consumer Price Index will be of significance with traders hoping for signs of a return of inflationary pressure. For Euro pundits, Tuesday’s German ZEW Economic Sentiment Survey will be poignant, not least as it will be one of the first reports to reflect the potential damage caused by the Volkswagen scandal.

The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.3630 during Friday’s London session.