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Pound Sterling (GBP) to Euro (EUR) Fluctuates Flatly on Bank of England (BoE) Disappointment

December 16, 2016 - Written by Tim Boyer

The Pound to Euro exchange rate saw little change in movement on Friday as investors continued to react to Thursday’s disappointing Bank of England (BoE) meeting and the latest Brexit news. Meanwhile, the Euro recovered from its lows against the US Dollar.

GBP/EUR began the week at the level of 1.1905. After hitting a weekly high of 1.1988 on Thursday the pair fell back again on as of Friday trended in the region of 1.1900 once again.

Pound (GBP) Weak on BoE News and Brexit Jitters



The Bank of England (BoE) met for its final 2016 policy meeting on Thursday and its decision didn’t surprise anyone – policymakers opted to leave monetary policy frozen and kept its aggressive stimulus measures in place.

However, the bank also indicated that the UK’s inflation spikes (which had impressed GBP traders earlier in the week) was not substantial enough to entertain the possibility of monetary tightening.

Investors were disappointed as they had hoped higher-than-expected UK inflation could pressure the BoE to hike rates back up again, but the BoE reiterated that the Pound’s changes in value made this unsurprising and they expected further inflation fluctuations in the coming year.

Sterling was also weakened slightly on Friday by the latest Brexit news. UK Prime Minister Theresa May was warned by EU officials that a new trade deal following Brexit could take as long as 10 years to negotiate.

Euro (EUR) Recovers from USD-Correlated Selloff



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Demand for the Euro has been poor over the last week, as political and economic tensions in Eurozone nations have kept concerns about the bloc’s future at the forefront of EUR trade.

Most recently, a feud re-emerged between Greece, the Eurogroup and the IMF in regards to debt relief talks for the nation. This, as well as the bullishness of the negatively-correlated US Dollar, left the Euro considerably weak on Thursday.

However, as the US Dollar was sold from its highs on Friday morning, the Euro recovered slightly. The Eurozone’s final November Consumer Price Index (CPI) results met expectations and as a result did not influence the direction of GBP/EUR exchange rates.

GBP/EUR Forecast: Quiet Economic Calendar in Week Before Christmas



The Pound to Euro exchange rate’s movement may be even smaller in the coming week as the holiday period approaches.

Trade in the foreign exchange market is likely to lighten as traders take a break for the festive season, and this light trade could lead to additional volatility throughout the week.

The coming week’s ecostats will not be hugely influential compared to recent weeks. Monday will see the publication of the Eurozone’s construction output results for October and the IFO’s December German business sentiment results.

UK public sector net borrowing results and Eurozone consumer confidence figures will follow on Wednesday, and the European Central Bank (ECB) will publish its final economic bulletin of 2016 on Thursday.

The publication with the biggest influence could be next Friday’s UK Gross Domestic Product (GDP) results for Q3, particularly if they miss preliminary projections.

Besides that possibility, the main things to look out for in terms of GBP/EUR movement potential will be fresh Brexit news and ongoing political and economic events in the Eurozone.
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