Sterling (GBP) Rally Looks to Continue
After its brief hiccup on Monday, the Pound’s gains continued throughout Tuesday as concerns towards the EU Referendum’s ‘Leave’ campaign lightened slightly.
A telephone poll conducted by The Telegraph suggested that an increasing amount of ‘Remain’ supporters intended to vote in June’s referendum while ‘leave’ voter numbers remained steady.
The Euro’s (EUR) weakness appears to be ongoing as bullish economic sentiment from the latest ZEW survey was unable to inspire strength in the shared currency, and the Pound continued climbing as Wednesday UK employment datasets approached.
The GBP/EUR exchange rate was trending in the region of 1.2661
GBP/EUR Briefly Falls Before Regaining Losses
The Pound (GBP) was initially knocked downward on Monday by a series of statements from UK Chancellor of the Exchequer George Osborne.
He claimed that a ‘Brexit’ would not only have Britain feeling ‘permanently’ worse off until 2030 or longer, but that it would also influence massive cuts on services such as schools and the NHS.
However, GBP/EUR made a recovery of around 90 pips towards the end of Monday’s session as Eurozone uncertainty continued to rise following IMF warnings ahead of the ECB’s next rates decision.
- GBP/EUR Flat into the Weekend – Data-light Friday leaves investors uninspired
- Pound’s Maintains Weekly Gain – Well up on last week’s levels
- Forecast: UK Job Data on Wednesday – Retail sales data follows on Thursday
- Forecast: ECB Decisions Next Thursday – Investors still reel from March’s easing
The Pound Sterling to Euro (GBP/EUR) exchange rate experienced an unexpected rally over the past week as hopeful UK data and steel crisis developments pushed down a Euro weakened by European Central Bank (ECB) anxieties.
GBP/EUR was trending in the region of 1.2550 before the weekend. Throughout the week, Sterling has sustained appreciations of around 160 pips from the week’s opening of 1.2395, completing the week with a generally definitive and steady rally.
Pound (GBP) Up This Week on Bullish CPI
Various factors allowed the Pound to climb this week and recover from a near two-year low. Investor appetite for Sterling saw its first gains on Monday as the result of profit taking and the House of Commons reconvening after Easter.
Gains were extended after one of Tata Steel’s biggest UK plants found a buyer in Greybull Capital, securing the future of over 4,000 UK jobs.
Completing a hat trick for the Pound, Tuesday’s key Consumer Price Index (CPI) reports indicated a stronger-than-expected improvement in UK inflation.
Sterling’s advancement slowed later as CPI shock wore off and Thursday’s Bank of England (BoE) announcements failed to inspire any movement after minutes revealed nothing that ‘Brexit’-anxious analysts and investors didn’t already know.
Euro (EUR) Weaker on ECB Concerns, Soft Data
Sterling’s Eurozone rival weathered considerable storms this week as criticisms leveled at the European Central Bank’s (ECB) current easing methods entrenched themselves in investors.
ECB President Mario Draghi came under fire from German Finance Minister Wolfgang Schaeuble last weekend, with Schaeuble calling the ECB’s extensive easing ‘dangerous’ towards Germany. Other finance ministers and policymakers have since come out in Draghi’s defence.
Data this week was unable to inject confidence into the Euro either, as on-target German CPI was softened by German-ECB rows and industrial production depreciated from 2.9% to a lower-than-expected 0.8%.
Eurozone CPI released on Thursday helped to minimise Euro losses, matching expectations in most prints and unexpectedly leaving contraction in its year-on-year print. While stagnant at 0.0%, the ECB is more likely to be optimistic than it would have been with the forecast -0.1%.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: ECB in Focus Next Week
Hot on the heels of last week’s European Central Bank (ECB) minutes release, the central bank is back in action next Thursday with April’s key decisions – and the last ECB rate decision until June.
This includes the interest rate, deposit rate, and marginal lending facility announcements, as well as – of course – any surrounding comments by policymakers that are bound to have investors taking action.
Investors are also likely to react to the International Monetary Fund (IMF) and World Bank Group (WBG) ‘2016 Spring Meetings’, which take place in Washington DC over the weekend.
Various events where economic experts speak on the global economy may make headlines and lead to investor reactions on Monday, especially with the European Union’s tax haven scares currently in the IMF spotlight.
Upcoming UK data is set to be less bustling than the past week’s, though Wednesday will be populated by key employment data including jobless claims, average weekly earnings, and the anticipated unemployment rate.
The ‘Brexit’-worn Pound may also weaken or strengthen depending on the ongoing strength of the official ‘Leave’ and ‘Remain’ teams respectively, who began their official EU Referendum campaigns on Friday.