GBP to EUR Exchange Rate Fluctuating Ahead of Thursday?s Key UK and Eurozone Datasets

March 28, 2018 - Written by Frank Davies

STORY LINK GBP to EUR Exchange Rate Fluctuating Ahead of Thursday?s Key UK and Eurozone Datasets

Hopes that the UK government was closer to finding a solution to the persistent issue of the Irish border post-Brexit was not enough to help the British Pound to Euro (GBP/EUR) exchange rate to sustain gains on Wednesday. The pair instead fluctuated ahead of Thursday’s key datasets.

Due to end of quarter fixings and mixed market sentiment towards the Euro this week, GBP/EUR has fluctuated within a relatively wide region since Monday. GBP/EUR opened the week at the level of 1.1435 and has since fluctuated between 1.1469 and 1.1369. The pair trended just below the week’s opening levels on Wednesday afternoon.

GBP Holds Above Lows on Fresh Brexit Hopes

Tuesday saw investors sell the Pound in end of quarter fixings, as markets adjusted positions and sold the British currency from its highs in profit taking with March, and Q1, drawing to an end this week.

On Wednesday, Sterling demand improved again slightly as the selloff cooled and investors reacted to news that the UK government was preparing to propose a new potential solution to the issue of Ireland’s border.

The Irish border has been one of the most contentious issues of Brexit negotiations, as Northern Ireland wishes to maintain a soft border with both the rest of the UK and with the Republic of Ireland – which is in the EU.

It was reported in The Times newspaper that Irish officials were being told to expect imminent new proposals from Britain.

This helped the Pound to hold its ground on Wednesday.

EUR Gains Limited by Eurozone Inflation Concerns

Tuesday’s Spanish Consumer Price Index (CPI) data continued to weigh on the Euro throughout Wednesday trade, as investors speculated that Eurozone inflation was still too subdued to support tighter monetary policy from the European Central Bank (ECB) any time soon.

Spain’s March inflation projections fell short of expectations in all major prints on Tuesday.

Month-on-month inflation was forecast to edge higher to 0.3% but instead remained at 0.1%, while the yearly inflation print only rose slightly from 1.1% to 1.2% rather than the expected 1.5%.

The disappointing inflation data was followed by news that Eurozone consumer inflation expectations slipped in March too, from 18 to 16.1.

Eurozone business confidence stats also largely fell short of expectations in Tuesday. Business confidence fell from 1.48 to 1.34 rather than the forecast 1.39, while services, economic and industrial confidence prints all disappointed too.

Wednesday’s data helped to support the Euro slightly though and held GBP/EUR back from gaining. Germany’s April consumer confidence report from GfK beat expectations, rising from 10.8 to 10.9.

GBP/EUR Forecast: UK Growth and German Inflation Due Thursday

Key data due on Thursday has the potential to influence the Pound to Euro exchange rate’s movement towards the end of the week if any of the data surprises investors.

Britain’s key Q4 Gross Domestic Product (GDP) results will be published in the morning. The growth rate is forecast to have slowed slightly from 0.5% to 0.4% quarter-on-quarter and from 1.8% to 1.4% year-on-year.

Still, as investors are already betting on a May interest rate hike from the Bank of England (BoE), this is unlikely to have a considerable impact on Sterling unless it comes in well below expectations.

German’s March Consumer Price Index (CPI) projections on Thursday, followed by French and Italian inflation on Friday, are more likely to have an impact on GBP/EUR.

If any of the upcoming inflation figures from Eurozone nations fall short of expectations, speculations of European Central Bank (ECB) hawkishness are likely to dampen and the Euro will weaken.

On the other hand, stronger than expected inflation figures would boost hopes of sustained Eurozone inflation, which would make the Euro more appealing and weaken GBP/EUR.

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TAGS: Pound Euro Forecasts