- GBP EUR Exchange Rate Drops Below 1.10 – Touches new 2017 low on Friday
- Euro Outlook Remains Strong – Investors speculate ECB will withdraw QE measures
- GBP Forecast: UK Inflation Due Tomorrow – Wage growth results on Wednesday
- EUR Forecast: Growth Projections This Week – Disappointing data could weaken Euro outlook
Updated 16:45 BST 14/08/2017:
GBP EUR Exchange Rate Flat Ahead of Key Ecostats
Monday’s trade session saw little change in the GBP EUR exchange rate. The pair continued to trend flatly, close to the week’s opening level of 1.10, throughout the day.
The coming days will be highly influential for Pound and Euro trade.
Tomorrow, Germany’s Q2 Gross Domestic Product (GDP) projections will be published, as well as UK inflation data from July.
[Previously updated 12:42 BST 14/08/2017]
After ending last week’s trade session just around the key level of 1.10, the GBP EUR exchange rate has continued to trend near that level since markets opened on Monday.
Amid a lack of influential UK data, Sterling remained limp. The Euro was little affected by the morning’s Eurozone stats.
Eurozone industrial production unexpectedly weakened in June, coming in at 2.6% year-on-year and missing the projected 2.8%.
Analysts reacted to the data by noting there was no reason to be concerned, which helped Euro trade to remain sturdy.
[Published 06:00 BST 14/08/2017]
Sterling continued to see poor performance last week as the GBP EUR exchange rate ended the week near its worst 2017 levels. The Pound could see stronger demand in the coming days if UK inflation or wage growth data impresses investors though.
The Pound Euro exchange rate opened at 1.1072 last week and spend most of the week trending within a relatively tight region. However, on Friday afternoon the pair briefly dropped to a new 2017 low of 1.0969 – the pair’s lowest level since 2009.
Limp Pound (GBP) Falls Amid Lack of Supportive Data
Last week saw Sterling continue to trade weakly.
Analysts don’t expect the Bank of England (BoE) to take a hawkish stance on monetary policy any time soon and recent data has been underwhelming, leaving investors with little reason to buy the undervalued Pound up from its lows.
Britain’s economic outlook is full of uncertainties and the BoE cut its UK growth and wage growth forecasts in its most recent meeting.
UK datasets from June were mixed. UK manufacturing production met expectations and industrial production was better than expected, but UK trade data was highly disappointing.
Britain’s June trade deficit was forecast to lighten to around £-2.5b, but instead deepened to its worst level in nine months, £-4.56b.
This disappointing deficit result was largely due to a surprising drop in UK exports, the worst export figure since the month of the EU Referendum last year.
Analysts noted that the report indicated that the low value of the Pound was not helping to boost exports as hoped. According to James Smith, economist from ING;
‘This [data] is particularly concerning when you consider the backdrop of a 13 per cent post-Brexit fall in the Pound and the significant improvement in global growth prospects, particularly in Europe, a key trading partner for the UK’
With the Brexit process ongoing, Britain’s continued reliance on exporting to the EU has made Pound traders even more anxious.
Euro (EUR) Outlook Remains Strong
As with the Pound, the Euro outlook didn’t change much last week either.
However, while Britain’s data didn’t give investors much reason to buy the Pound, recent Eurozone data has been solid enough to help the Euro hold its ground.
Friday’s final July Consumer Price Index (CPI) results from Germany, France, Spain and Italy met projections in every major print, so the Euro continued to trend steadily.
Germany’s inflation rate came in at 1.7% year-on-year and 0.4% month-on-month, as expected.
The Euro did get a small boost in demand on Friday afternoon though. As the latest US inflation results disappointed, investors sold the US Dollar (USD).
As the Euro is negatively correlated to the US Dollar, Euro demand increased and pushed GBP EUR down to a new 2017 low.
Investors are overall bullish on the Euro outlook. With Eurozone inflation gradually improving and recent Eurozone data strong, analysts predict the European Central Bank (ECB) could soon announce that it will unwind its quantitative easing (QE) measures.
GBP EUR Exchange Rate Forecast: Key Week for Ecostats Ahead
Over the next week, the Pound to Euro exchange rate could see some big shifts in movement as a slew of important data will be published from Tuesday through Thursday.
While the Eurozone’s June industrial production results may be slightly influential on Monday, the main bulk of the week’s data will begin in Tuesday with Germany’s Q2 Gross Domestic Product (GDP) projections and Britain’s July Consumer Price Index (CPI) results.
Investors expect that UK inflation rose slightly in July. If UK inflation beats expectations, this could put additional pressure on the Bank of England (BoE) to tighten UK monetary policy within the foreseeable future.
Wednesday will also be a key session. Both Britain’s June wage growth results and the Eurozone’s latest Q2 growth projection will be published.
If UK wage growth worsens, UK economic concerns will worsen too and the Pound will remain weak. However, stronger than expected UK wage growth would encourage investors to buy GBP EUR from its lows.
Meanwhile, surprising Eurozone growth results could influence the Euro outlook.
If the Eurozone economy looks to have grown at a slower rate than expected in Q2, investors may become concerned that the European Central Bank (ECB) is more likely to extend its quantitative easing (QE) measures than unwind them.
The same can be said for the Eurozone’s final July inflation results, due Thursday. Overall, the GBP EUR exchange rate could see a big recovery next week – or remain limp – depending on data.
