After the Pound’s depreciation following dovish minutes from the BoE’s most recent policy meeting was considered unjustified, given that the Monetary Policy Committee’s (MPC) ‘Brexit’ concerns have already been priced-in, the GBP/EUR exchange rate advanced during Friday’s European session. Even weaker-than-anticipated British Construction Output wasn’t enough to offset Sterling gains.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.2528 to 1.2596 during Friday’s European session.
Bank of England policymakers kept the cash rate unchanged, but the Pound continued to decline versus its major peers. The depreciation can be linked to the accompanying minutes which showed that ‘Brexit’ concerns are being considered in policy outlook.
- Pound Sterling cools after House Price Balance misses estimates
- Euro edges higher ahead of Eurozone inflation data
- Bullish USD limiting EUR gains
- Bank of England (BoE) forecast to hold the benchmark interest rate
Pound Sterling (GBP) Exchange Rates Soften as RICS House Price Index Hits Nine-Month Low
The Pound Sterling to Euro (GBP/EUR) exchange rate ticked lower by around -0.2% on Thursday afternoon.
As traders await the Bank of England’s (BoE) interest rate decision, the British Pound softened versus most of its currency rivals. The depreciation can be linked to expectations of a dovish outlook from BoE policymakers given EU referendum uncertainty.
However, any sign of dissent among policymakers could result in Sterling gains. Political uncertainty could limit any GBP appreciation, however, with many analysts still expecting further Sterling losses to come as we draw ever closer to the June 23rd EU referendum vote.
Also weighing on demand for the Pound was less-than-ideal domestic data. The RICS House Price Balance was predicted to hold at 50% on March, but the result actually dropped to 42%.
‘As expected, the buy-to-let rush has now run its course, and as a natural result, the market is starting to slow,’ Simon Rubinsohn, chief economist at RICS, said. ‘Elections inevitably bring with them periods of uncertainty in the market, and our figures would suggest that next May’s devolved elections are no exception. Likewise, the EU referendum, is likely to be an influencer in terms of the damper outlook for London in particular.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2557.
Euro (EUR) Exchange Rates Strengthen ahead of Eurozone Inflation Data
With the final figures for March’s Eurozone Consumer Prices predicted to show inflationary growth, the single currency advanced versus a number of its major peers. Inflation in the Eurozone remains well below the central bank’s target, however. With that in mind, many analysts still predict further policy easing from the European Central Bank (ECB) this year.
Whilst the UK’s EU referendum is only having a detrimental impact on the Pound thus far, markets will soon have to price-in the potential for a ‘Brexit’ on the Euro. A British exit from the EU will inevitably impact on the Eurozone and therefore the single currency.
Even if Eurozone inflation surprises significantly to the upside, the chance of a sustained Euro appreciation is limited. This is because the US Dollar is enjoying a bullish run. As the most traded currency pairing on the globe, the EUR/USD negative correlation has anchored EUR appreciation lately.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.2528 during Thursday’s European session.
GBP/EUR Exchange Rate Forecast: US Inflation Data to Provoke Volatility
Although the Bank of England interest rate decision may influence GBP/EUR exchange rate movement, the impact is likely to be minimal given the high likelihood that policymakers will keep outlook unchanged at this time. The Eurozone inflation data is also unlikely to be hugely impactful given that March’s final figures are not expected to deviate from previous estimates.
US economic data, however, could be impactful. If US Consumer Prices disappoint there is a high chance that the single currency would get a significant boost from the resultant USD depreciation. Conversely, a positive result for US inflation data will likely cause the Euro to decline.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.2589 during Thursday’s European session.