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GBP to EUR Exchange Rate Slides as Hopes of Eurozone Economic Recovery Persist

April 17, 2019 - Written by David Woodsmith

Despite a lack of impressive new Eurozone data today, the British Pound to Euro (GBP/EUR) exchange rate has kept falling. Brexit uncertainties kept pressure on the Pound, while the Euro is still benefitting from market hopes that the Eurozone economy is gradually turning around from the slowdown seen since the end of last year.

A combination of Brexit uncertainties and Eurozone economic hopes left GBP/EUR sliding last week, tumbling from the level of 1.1619 to 1.1565 throughout the week. That sort of movement seems to be continuing this week so far, and for largely similar reasons.

At the time of writing today, GBP/EUR was trending nearer lows of 1.1522. This was the lowest level for the pair since the 21st of March – almost a month ago.

Amid a lack of likely support from Brexit developments on the near horizon, Pound to Euro exchange rate investors are now looking ahead to upcoming UK and Eurozone data for the pair’s next moves.

GBP Exchange Rates Fail to Find Fresh Support as UK Inflation Falls Short of Forecasts

At the beginning of this week, the Pound was supported by a brief rise in hopes for a soft Brexit. Speculation that talks between the government and opposition Labour Party were progressing made investors more optimistic.

However, these hopes were short-lived, as on Tuesday a report emerged claiming that Labour Party Leader Jeremy Corbyn was saying that talks were stalling.

Some officials attempted to play down the validity of the report, but overall the news made investors more doubtful that a new soft Brexit deal was becoming more likely and this weighed heavily on the Pound.

Following the latest rise in Brexit uncertainties, the latest UK data did little to make the British currency more appealing either.

This morning, Britain’s March Consumer Price Index (CPI) inflation rate report fell short of expectations in all major prints, giving investors little reason to shift expectations that the Bank of England (BoE) will hold its ground on UK monetary policy this year.

According to Justin Onuekwusi, Fund Manager at Legal and General Investment Management, this muted movement in Sterling is likely to continue:

‘It seems very unlikely we will get a resolution on Brexit much before the 31 Oct deadline so what that means is more uncertainty and sterling doing very little in the meantime,

Without an agreement or hard Brexit I can’t see GBP doing much.’

EUR Exchange Rates Remain Resilient despite Unsurprising Eurozone Data

Demand for the Euro has been increasingly resilient in recent weeks, due to signs of economic recovery in recent Eurozone ecostats.

This has continued to support the Euro this week so far, despite the latest Eurozone inflation data being largely unsurprising and having no notable impact on the Eurozone economic outlook.

Eurozone Consumer Price Index (CPI) inflation rate figures from March were published this morning, and every notable figure met forecasts.

This also meant that, as expected, inflation slowed year-on-year though it did improve month-on-month to 1.0%.

The data justified the European Central Bank’s (ECB) cautious tone, but investors remain more optimistic on the Eurozone economic outlook regardless due to other recent stats, showing improving economic activity and confidence.

Investors remain hopeful that the Eurozone’s economic activity is gradually recovering from the slowdown seen earlier in the year.

Hopes that the global economic slowdown is cooling also benefitted Euro demand. The latest Chinese growth rate data beat expectations, bolstering hopes that the global economic outlook is improving.

GBP/EUR Exchange Rate Forecast: Thursday’s Key Data Could Drive Shift in Movement

Pound to Euro exchange rate movement has been relatively little-changed this week so far, but with major data due for publication tomorrow the pair could end the week on a different trajectory.

The Eurozone’s April PMI projections and Britain’s March retail sales are likely to be highly influential ecostats.

For example, Eurozone PMIs will give investors a better idea of whether or not the Eurozone economy is rebounding from months of slowdown. Stronger PMI data could lead to stronger Euro demand and GBP/EUR would tumble.

Over in Britain, retail sales data will give markets stronger indication of how resilient UK economic activity has been amid Brexit uncertainty, especially with months more uncertainty likely on the horizon.

With many markets closed for a bank holiday on Friday, Thursday’s data is likely to set the tone for Pound to Euro exchange rate movement until next week.
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