GBP/EUR Exchange Rate Advances on Higher Global Risk Sentiment

March 15, 2018 - Written by James Fuller

STORY LINK GBP/EUR Exchange Rate Advances on Higher Global Risk Sentiment

On Wednesday, the Pound to Euro exchange rate saw a minimal advance from an opening level of 1.1275 to close higher around 1.1289 later on.

Today’s GBP/EUR trading has been superior by comparison, with the Pound to Euro rate hitting 1.1316.

Sterling to Euro Exchange Rate Improves on Global Economic Uncertainty

The Pound has advanced against the Euro on 15th March – this is primarily down to currency traders migrating to the Pound after other options were deemed too risky.

The question of a trade war between the US and other nations remains a significant one, as China has recently rattled traders with a warning.

In a widely-seen editorial, Chinese newspaper Global Times said;

‘If the US wants to reduce its trade deficit, it has to make Americans more hard-working and conduct reforms in accordance with international market demand, instead of asking the rest of the world to change.

Once a trade war starts, capable countries won’t bow to the US. China has tried hard to avoid a trade war, but if one breaks out, appeasement is not an option’.

These are still early days for a potential economic conflict between the US and the rest of the world, but the situation remains a potential powder keg that could blow in the coming months.

Disappointing Irish GDP Data Triggers EUR/GBP Exchange Rate Losses

The Euro to Pound exchange rate has been unfavourable on 15th March, following the earlier release of unsupportive Irish GDP data.

During Q4 2017, the GDP growth rate slowed on both the quarter and the year, although Ireland remains the fastest growing economy in the EU regardless.

This fact was perhaps ignored by Euro traders because of questions over the accuracy of GDP when measuring Ireland’s economic performance.

Elsewhere, Euro traders have also been unsettled because of potential damage to the Eurozone being caused by planned US metal tariffs.

Charges on importing steel and aluminium into the US will come into effect on 23rd February and there is no indication that the EU will see an exemption.

The verdict is still out on whether the US could see greater damage from the planned tariffs, but the concern that the Eurozone will be harmed are still tangible.

GBP/EUR Exchange Rate Forecast: Will UK Inflation Rate Stats Trigger Pound to Euro Exchange Rate Rally?

After this week’s relative draught of UK economic news, the Pound to Euro exchange rate could see substantial gains on next week’s high-impact data releases.

These will primarily consist of inflation rate data on 20th March, followed by employment stats on 21st March and the Bank of England (BoE) interest rate decision on 22nd March.

Inflation rates in February are predicted to have slowed, while January’s unemployment rate is also expected to show a slowdown.

Both of these outcomes might push the Pound to Euro exchange rate higher, as they may increase the chances of an early BoE interest rate decision.

Sealing the deal would be growth in the pace of UK average earnings (also out on 21st March), although current forecasters aren’t pencilling in this outcome.

The best scenario for Pound traders after the BoE interest rate decision on 22nd March will be an indication that economic conditions could improve over the coming months.

If BoE policymakers echo the positive findings of the spring statement, the Pound could advance against the Euro due to a boom in GBP trader optimism.

The next Eurozone data to watch out for will arrive sooner, in the form of Eurozone inflation data on 16th March and trade and construction stats on 19th March.

Levels of year-on-year inflation in the Eurozone are predicted to have fallen in February, from 1.3% to 1.2%.

Such a result could spark a Euro to Pound exchange rate slump, as this will mean that the European Central Bank’s (ECB) 2% inflation target is getting further away.

ECB policymakers have linked inflation matching their target with the likelihood of tightening monetary policy, so falling inflation rates will be doubly disappointing for Euro traders.

The situation may improve on the coming Monday as the Euro could be boosted by a forecast-matching rise in construction output.

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TAGS: Pound Euro Forecasts