The Euro to Pound Sterling (EUR/GBP) exchange rate is expected to experience another week of volatility next week as the markets weigh up the release of a number of important economic data releases from both the UK and Eurozone.
On Monday, the GBP/EUR exchange is likely to see mixed movement due to the number of data releases. First up will be the publication of French, Italian, German and Eurozone manufacturing PMI data. The Eurozone PMI is forecast to rise from 51.0 to 51.1. As the session progresses, we will then see the release of UK Manufacturing PMI data which is forecast to come in at a better than expected level in February. Next up will be UK Mortgage approvals data, which is forecast to show a decline in January. The main event of the session however will be the flash reading for Eurozone inflation and the latest unemployment data. A weaker than forecast inflation report is likely to put pressure on the Euro, but an improved unemployment report would cancel out any weakness.
On Tuesday, the Pound could receive support if February’s Construction PMI data comes in positively. A strong report would ease concerns that the UK economy is slowing and could increase pressure on the BoE to hike interest rates. The only major report out of the Eurozone will be Producer Price Inflation (PPI). On annual basis, PPI is likely to fall by -1.83%.
Wednesday will prove to be a busy session as a plethora of PMI reports are due to be released from the Eurozone. Services and Composite PMI’s, are forecast to be released as well as retail sales data. The UK will also see the publication of UK Services PMI.
On Thursday, the Bank of England is due to announce its latest interest rate decision. The bank’s policy makers will leave rates unchanged at 0.5%. Sterling could rise however if there is any indication that policy makers are becoming more divided on the decision, especially following comments made by policy makers last week.
The European Central Bank (ECB) is also due to announce its interest rate decision and policy makers will hold a press conference. The ECB is widely expected to announce the launch of its €1.1 trillion quantitative easing programme. If that does not happen then the Euro will likely fall.
Also in focus will be events in Ukraine. If the ceasefire holds then risk aversion will have less of an impact.
Friday also sees the publication of the latest UK House price data.
Uncertainty over the outcome of the UK general election is also expected to impact upon the Pounds movements.