Last week saw the Pound Sterling to Euro (GBP/EUR) exchange rate strengthen considerably. This was mostly the result of geopolitical tensions in Greece weighing on demand for the single currency. However, the Pound also rallied thanks to positive sentiment towards the Bank of England (BoE) after Governor Mark Carney suggested that a rate hike was likely within 2015.
During Friday’s European session, the Pound Sterling to Euro (GBP/EUR) exchange rate hit a best rate of 1.4412. This was close to an 8-year high.
Pound Sterling (GBP) Exchange Rate Forecast to Cool on Profit-Buying
Having gained significantly over the course of last week, the Pound could potentially cool as traders lock in profits after the upsurge has opened up some attractive selling opportunities. In addition, fears that the British asset is overvalued could also aid the downtrend. This is significant because the Bank of England will be reluctant to increase the benchmark interest rate with such a high valued Pound.
Looking ahead, there will be several influential British economic data publications over the coming week with the potential to provoke changes for the Pound. Of particular significance will be minutes from the most recent Monetary Policy Committee (MPC) meeting to see whether any policymakers dissented and voted for a benchmark interest rate hike.
In addition to the meeting minutes; Public Sector Net Borrowing, CBI Trends Orders, BoE Governor Carney Speech, BBA Mortgage Approvals, Retail Sales and Retail Sales ex Fuel will all be of significance to those invested in the Pound.
Euro (EUR) Exchange Rate Forecast to Decline on Policy Divergence
Although the geopolitical tensions surrounding Greece are looking likely to ease somewhat now that Germany has formally accepted the terms of the third Greek bailout deal, many analysts are predicting that the Euro will continue to soften. This is because market focus will shift from geopolitics to monetary policy, and the European Central Bank (ECB) is well behind the Federal Reserve and the Bank of England having only comparatively recently cut the cash rate.
With geopolitical tensions easing, however, domestic data is likely to have a more significant impact on Euro volatility. With that being said, the European economic docket is relatively sparse over the coming week. For those invested in the common currency; The German Producer Price Index, Eurozone Current Account, Eurozone Consumer Confidence, German Manufacturing PMI, German Services PMI, German Composite PMI, Eurozone Manufacturing PMI, Eurozone Services PMI and Eurozone Composite PMI will all be of interest.
At the close of last week, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.4303 to 1.4412.