GBP to EUR Exchange Rate Tumbles from Highs but Sterling Gains Likely This Week

March 23, 2018 - Written by Minesh Chaudhari

STORY LINK GBP to EUR Exchange Rate Tumbles from Highs but Sterling Gains Likely This Week

Despite firming bets that the Bank of England (BoE) will hike UK interest rates in May and solid UK ecostats, the British Pound to Euro (GBP/EUR) exchange rate fell from its weekly highs towards the end of the week. The Euro benefitted slightly from weakness in rivals like the Pound and US Dollar (USD).

After modern gains from the pair last week, GBP/EUR looks to sustain even stronger gains this week. GBP/EUR opened the week at the level of 1.1342 and briefly touched on a six-month-high of 1.1506 on Thursday, before slipping towards the level of 1.1440 towards the end of the week.

Pound (GBP) Sold from Highs in Profit Taking after Bullish Week

The Pound has been unable to hold its best levels this week, but is still on track to end higher against the Euro regardless.

Earlier in the week, Sterling saw major support from stronger than expected UK wage growth results and solid job market data.

Thursday then followed as impressive retail sales stats and a relatively hawkish Bank of England (BoE) policy decision helped investors to firm on bets for a May interest rate hike from the BoE.

It’s been an overall optimistic week for Pound trade, as investors now expect the BoE to hike UK interest rates in May and there is confidence that a post-Brexit transition period for Britain has been largely agreed too.

As a result, Sterling’s late-week losses are more to do with investors selling the currency from its highs in profit taking than any particular dovish news.

Euro (EUR) Sturdy amid Weakness in Rivals

While the Euro has been weighed by underwhelming Eurozone ecostats over the past week, the shared currency was able to capitalise on Sterling’s late-week selloff.

Weakness in the Pound, as well as weakness in the US Dollar (USD), made the Euro more appealing to investors on Friday.

The US Dollar has been pressured by market concerns about the US Presidency’s protectionist stance on trade, as well as US political uncertainty amid White House staff shakeups.

News that the EU would see a temporary exemption from strict US trade tariffs also supported the Euro slightly on Friday.

GBP/EUR Forecast: Key Datasets Due Next Week

The Pound to Euro exchange rate could be driven more by data in the coming week, as key UK growth stats and the first March inflation projections for the Eurozone will be published throughout the week.

Britain’s final Q4 2017 Gross Domestic Product (GDP) results will be published on Thursday and are projected to have slipped from 0.5% to 0.4% quarter-on-quarter and from 1.8% to 1.4% year-on-year.

Eurozone inflation projections due next week include Spain’s on Tuesday, Germany’s on Thursday and French and Irish projections on Friday.

Eurozone consumer and business confidence survey data from March will also be published and are due on Tuesday.

Of course, any surprising developments on the Brexit process or Brexit negotiations are likely to influence the Pound next week too. The Euro could continue to see reaction to US Dollar (USD) strength and US trade protectionism concerns as well.

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TAGS: Pound Euro Forecasts