The Pound Sterling to Euro (GBP/EUR) exchange rate suffered a considerable hit last Thursday after surprising investor movement but Sterling seems eager to regain lost ground.
Pound (GBP) Finally Maintains Foothold after ECB’s Shocking Thursday Announcement
Opening the week to a studier Pound (GBP) proved that Thursday’s large downtrend against Sterling wasn’t a lasting one. The GBP/EUR pair is currently trending in a narrow range, staying in the region of 1.2893. GBP/EUR is ever so slightly up on this morning’s opening levels of 1.2883.
Last week was a difficult period for the fatigued Pound as UK seemed stumped by ‘Brexit’ news. Continued anxiety surrounding UK’s relationship with the EU made any prolonged growth from GBP difficult and muted.
What initially seemed to be another heavy blow to Sterling was European Central Bank (ECB) President Mario Draghi’s press conference, where he implied – despite extensive bearish measures being introduced to weaken the Euro – that further interest rate cuts by the central bank were unlikely.
For a short period of time on Thursday afternoon the Euro soared against many of its rivals, including the Pound, as the theory that the ECB has introduced all the policy measures it can to bolster the Eurozone saw investors flock to the common currency.
This sentiment seems to have worn off however, as investors have once again begun to back away from the shared currency. ECB Vice President Vitor Constancio posted a blog on the central bank’s website implying that, if the Euro failed to weaken substantially, further methods of Eurozone stimulus in fact were still possible.
While not initiating the sharp Euro weakness the ECB had perhaps hoped for, EUR appears to be gradually weakening as of Friday and this morning – allowing the Pound to seemingly find a growth foothold.
Positive Eurozone Data Unable to Influence Pair as Pound (GBP) Continues its Gradual Climb
In what is perhaps another implication that the ECB’s methods to weaken the Euro could be working, positive industrial production data from the Eurozone region released this morning was unable influence Sterling’s slow climb, despite there being a lack of bullish UK data.
After previously contracting, new Eurozone data showed that industrial production had grown more than expected in January. While output was projected to return to a positive 1.6% from -0.1% for January year-on-year, the new figure shows more impressive 2.8% growth.
The lack of impact on the Pound is speculated to be the result of the Pound’s long period of weakness resulting in a natural bounce-back in addition to ECB-influenced Euro weakness.
Investors are likely to be holding firm with their position on the Pound and not making any risky movements on it as they wait for this week’s key announcements from the Bank of England (BoE), and Chancellor George Osborne’s 2016 Budget speech.
Increased risk sentiment from last week is also thought to have driven investors towards riskier currencies and away from the Euro.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Further Movement Hinges on Bank of England (BoE) Announcements
A period of muted movement from the Pound seems set to come to an end in some form or another this week as the Bank of England (BoE) prepares for its anticipated rate decisions on Thursday.
The slow and steady climb of the GBP/EUR pair could see more influential movement after the central bank announces whether or not the national interest rate will be kept at the expected 0.50%. Though recent UK releases have not been overly positive, the bank deciding that current growth is sustainable is sure to give the Pound a much-needed boost in strength against its rivals.
Alternatively, a more bearish outlook from the BoE is likely to have investors taking a cautious approach to GBP investment, weakening it for even longer.
Also set for this week is the 2016 UK Budget speech from Chancellor of the Exchequer George Osborne. Many analysts anticipate that further cuts will be made to citizen benefit systems, though whatever sentiment is made or announcement given is very likely to influence the Pound likewise.
Meanwhile the Eurozone is due to release employment figures tomorrow and updated Consumer Price Index (CPI) data on Thursday – shortly before the Bank of England’s decision. Thursday seems set to be a highly influential day for GBP/EUR pair.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2893 while the Euro to Pound Sterling (EUR/GBP) exchange rate trends in the region of 0.7755.