The Pound Sterling to Euro (GBP/EUR) exchange rate ticked higher by around 0.2% on Monday morning.
Although the Pound Sterling strengthened versus its major peers on Monday morning, the British asset is still holding a position of weakness. The fractional recovery can be linked to speculation that Friday’s Sterling depreciation was overdone. However, many traders have pushed back bets as to the timing of a Bank of England (BoE) rate hike until September 2016. This will weigh on demand for the Pound, especially given the complete absence of domestic data on Monday to provoke changes.
The Euro, meanwhile, softened versus many of its currency rivals on Monday following the conclusion of the G20 summit. The summit showed officials were less concerned regarding China’s equity markets and officials believe that the intervention from Beijing has had a positive impact. This caused market sentiment to improve and demand for safe-haven assets to dampen. Although German Industrial Production bettered estimates on the year in July, traders await Eurozone Investor Confidence data to provoke changes.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3634.
Pound Sterling (GBP) Exchange Rate Forecast to Fluctuate on Domestic Data
The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.5% during last Friday’s European session.
Last week the Pound lost significant ground against many of its currency rivals thanks to disappointing domestic data results. Of particular disappointment were missed estimates in the Construction, Manufacturing and Services PMIs. The services score caused the Pound to plunge given that the services sector accounts for the largest portion of Britain’s Gross Domestic Product.
Over the coming week there will be several influential British economic data publications with the potential to provoke changes for the Pound. Perhaps the most significant of which will be the Bank of England (BoE) Inflation Forecast for the next 12 months. With a distinct lack of global inflationary pressure, combined with bearish commodities in the face of China’s weakening demand, many analysts predict that the British central bank will cut inflation forecasts. The BoE interest rate decision is also due over the coming week, although the report is unlikely to be highly influential given that the majority of economists expect the BoE to hold the cash rate at 0.5%.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3649 during Friday’s European session.
Shared Currency (EUR) Exchange Rate Forecast to Decline on Overvaluation
Last week the common currency saw significant fluctuations thanks to changes in market sentiment. A dovish speech from European Central Bank (ECB) President Marion Draghi caused the common currency to dive, but losses were short-lived amid heightened demand for safe-haven assets. The single currency gained last Friday irrespective of a less-than-ideal set of domestic data publications.
Over the coming week European economic data is comparatively sparse, with the exception of Tuesday. Eurozone Gross Domestic Product will be of most significance to those invested in the Euro. Many analysts, including BNP Paribas, have predicted Euro depreciation over the coming weeks amid fears regarding overvaluation. Should the shared currency advance further the ECB is very likely to expand monetary policy in order to devalue the Euro.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.3632 to 1.3725 during Friday’s European session.