Pound Sterling to Euro Exchange Rate Forecast: GBP EUR to Wobble on Bank of England and Euroland GDP Data

May 11, 2015 - Written by John Cameron

STORY LINK Pound Sterling to Euro Exchange Rate Forecast: GBP EUR to Wobble on Bank of England and Euroland GDP Data

The Pound Sterling (currency:GBP) endured a rollercoaster session last week, initially haemorrhaging support in anticipation of an indecisive result from the UK General Election which took place on Thursday, and then recovering sharply on Friday when it became clear that the Conservatives had won a decisive victory.

The Pound euro exchange rate broke back above the 1.3800 GBP EUR threshold during the middle part of Friday’s session, however the euphoria surrounding Sterling is by no means guaranteed to persevere into this week’s session. The Bank of England makes its latest monetary policy decision, later than usual in the month due to last week’s British General Election, at midday Monday. In truth, the Bank is almost certain to announce that it will be maintaining its key interest rate at its current record low of 0.50%, but Wednesday morning’s BoE Quarterly Inflation Report is more likely to be market-moving. The Pound came under heavy selling pressure earlier in the year when more than one senior BoE policymaker hinted that the Bank’s next move on policy might be an interest rate cut.

Any repetition of such comments on Wednesday has decreased in likelihood thanks to the near-term forward move in global oil prices; if anything, Wednesday’s report could hint at the timing of an interest rate hike. Any suggestion that a tightening of UK policy might be forthcoming before the end of the year would provide Sterling with another push forward, potentially propelling the Pound Sterling euro exchange rate back through the 1.4000 level once again.

However, Wednesday morning’s session also brings the publication of two key data sets from the euroland. Gross Domestic Product numbers for Germany and for the whole of the eurozone will provide investors with fresh evidence on whether the European Central Bank’s ongoing Quantitative Easing programme is having the desired effect in boosting the region’s economy. Inflation figures from the euro area, published last month, revealed that the eurozone economy has moved out of deflation, suggesting that economic conditions in the region are improving, so an encouraging set of growth numbers would further strengthen the euro.

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