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Euro to Pound Exchange Rate Sheds Some Gains

April 15, 2019 - Written by Ben Hughes

Investors took a break from buying the surprisingly resilient Euro today, as the Euro to British Pound (EUR/GBP) exchange rate slipped back from the strong weekend levels it had closed at. Investors were buying the Pound back from its lows as last week’s Sterling selloff appeared overdone, and left markets anticipating major data due for publication in the coming sessions.

After opening last week at the level of 0.8606, EUR/GBP spent most of the week climbing thanks to a surprisingly resilient Euro and the latest Brexit developments weighing heavily on Sterling. EUR/GBP ended the week at the level of 0.8645 – rather close to Friday’s three week high of 0.8662.

No notable data was published today, leaving Euro to Pound exchange rate investors digesting last week’s economic data and political developments as they anticipate more influential data due in the coming sessions.

As no major Brexit developments are expected any time soon, Euro and Pound movements are both likely to be influenced by notable datasets this week.

EUR Exchange Rate Losses Limited amid Hopes for Resilience in Eurozone Economy

In recent weeks, investors have found the Euro a little more appealing due to emerging signs that the Eurozone’s economic slowdown is gradually coming to an end,

The Eurozone’s economy has been hit particularly hard by the global economic slowdown since the end of last year, and this has led to weak Euro performance for most of the year so far.

This has left investors eagerly awaiting signs of strength in the Eurozone economy recently, and more data is beginning to indicate that things may be turning around for the bloc.

Following some stronger Eurozone services data at the beginning of the month, last week saw the publication of the Eurozone’s better than expected industrial production stats from February.

Eurozone industrial production was predicted to worsen from -0.7% to -1.0% year-on-year in February, but instead lightened to -0.3%. The monthly figure came in at -0.2% rather than the expected -0.6%.

Due to the signs of stronger data, investors have even overlooked a generally cautious tone from the European Central Bank (ECB).

Hopes for the Eurozone economy to recover were supported slightly by continued hopes that a potential future Eurozone budget could help to improve stability and resilience in the bloc.

GBP Exchange Rates Rebound Following Week of Brexit Uncertainty

Last week was another hectic one for Pound investors and the Brexit process, as the previous formal Brexit date of the 12th of April approached and the UK and EU agreed to officially delay the date by an additional six months.

Britain now has until the 31st of October to reach a solution to the Brexit process before it crashes out with no deal. If a Brexit deal is reached before then, the date can be brought forward. This was what EU officials called a ‘flexible extension’.

While a no-deal Brexit was ruled out for six months though, investors sold the Pound on concerns that Britain’s economy was in for further months of uncertainty until a Brexit solution was reached.

Still, some analysts believed that last week’s Pound selloff was overdone. According to economists from Goldman Sachs:

‘Another extension to the Article 50 deadline lowers the probability of a quick resolution to the Brexit impasse, but we think the market seems to be taking this too far,

While slow, we see signs of progress in the negotiations, so there remains a meaningful chance that there is some resolution before the May 22 deadline.’

This helped Sterling to rebound from its lows today.

EUR/GBP Exchange Rate Forecast: Confidence and Jobs Data in Focus

Following yesterday’s rebound and lack of fresh influential news, the Euro to Pound exchange rate is likely to be driven by economic data tomorrow.

The most influential data of the day will be ZEW’s German and Eurozone economic sentiment figures for April, though February’s Eurozone construction output data may prove influential as well.

If the Eurozone confidence figures beat expectations, they could make investors more hopeful that economic activity in the bloc is still recovering. This would make the Euro more appealing.

As UK Parliament is on Easter break this week, Brexit developments are less likely. This means investors will be looking for signs of resilience in UK economic data to drive Pound movement.

Britain’s latest job market data will be published tomorrow. Eurozone and UK inflation data, due on Wednesday, may be even more likely to influence the Euro to Pound exchange rate.
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