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Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Advance after UK Construction Meets Estimates

GBP/EUR Conversion Rate Predicted to Strengthen, Quiet Trade ahead of ‘Super Thursday’

The Pound Sterling to Euro (GBP/EUR) exchange rate edged higher by around 0.5% on Tuesday afternoon.

After yesterday’s British Manufacturing PMI eclipsed expectations, rising from 51.8 to 55.5, the Pound rallied versus most of its major peers. In the early stages of Tuesday’s European session the Pound held a position of strength amid speculation that the significant improvement in manufacturing output will boost fourth-quarter Gross Domestic Product and could cause the Bank of England (BoE) to hike the cash rate ahead of expectations.

Tuesday’s solitary domestic data publication matched estimates. The Markit Constriction PMI met with the median market forecast drop in output from 59.9 to 58.8. However, the Pound has seen little by way of significant gains in response to the data result thanks to uncertainty ahead of ‘Super Thursday’. ‘Super Thursday’ is the term used for the Thursday in which BoE policymakers not only make their interest rate decision, but also release minutes from the meeting and their quarterly Inflation Report simultaneously. With such a plethora of information to come, uncertainty has fuelled subdued trade.

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.4072.

EUR/GBP Exchange Rate Predicted to Hold Losses ahead of Draghi Speech

Yesterday the single currency rallied versus its major peers thanks to a combination of hawkish sentiment from European Central Bank (ECB) policymakers and positive Euro-area manufacturing output. Whilst ECB President Mario Draghi stated that policymakers were still willing to use all of the tools at their disposal should it prove necessary, he also stated that further easing may not be required with Euro-area price pressures picking up. What’s more, policymaker Ewald Nowotny warned that the ECB should be extremely cautious before using additional stimulus.

On Tuesday morning the common currency continues to hold a comparative position of strength versus its currency rivals. This is partly in response to Federal Reserve rate hike uncertainty, but can also be attributed to speculation that the speech from President Mario Draghi later this evening will be hawkish in tone.

The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3978 during Tuesday’s European session.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Fluctuate on US Factory Orders

Given the absence of further domestic data publications to provoke significant Pound Sterling to Euro (GBP/EUR) exchange rate volatility, US data may be impactful. With EUR/USD negative correlation, a positive result from US Factory Orders data could cause the Euro to decline which would boost the GBP/EUR conversion rate.

Sterling trade is likely to remain subdued ahead of ‘Super Thursday’ with so much riding on the publications from the BoE. Should one or more policymakers opt for an immediate cash rate hike, or the inflation outlook improve, the Pound is likely to rally significantly. Similarly, any unexpectedly dovish tone in either the minutes or the inflation report will cause the British asset to dive across the board.

The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.4074 during Tuesday’s European session.