Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Decline despite Rising British House Prices
The Pound Sterling to Euro (GBP/EUR) exchange rate declined by around -0.4% on Thursday afternoon.
After the European Central Bank (ECB) surprised markets by employing far more aggressive stimulus measures than forecast, the GBP/EUR exchange rate rallied significantly. However, gains were very short-lived as ‘Brexit’ concerns continue to limit the appeal of the British Pound.
Whether accurate or not, the media frenzy naming prominent British figures as supportive of a ‘Brexit’ has caused concern. Despite complaints from the Royal Family regarding inaccuracy, the Sun newspaper reported that the Queen is one of those hoping to leave the EU. Even if it is a completely false report, there will be many who will take the report at face value.
The Pound avoided heavy depreciation today despite elevated concerns over a ‘Brexit’ thanks to a positive result from the solitary domestic data publication. The RICS House Price Balance for February equalled the median market forecast of 50%. However, the headline figure masked a dramatic drop in rising London house prices.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2880.
EUR/GBP Exchange Rate Reverses Early Losses as Traders React to Draghi Statement
The European Central Bank cut all of its rates and expanded quantitative easing well beyond expectations. However, the Euro quickly reversed initial losses. This is partly the result of European bank stocks surging in response to the expansion of asset purchases.
Also highly supportive of demand for the single currency was the accompanying press conference in which President Mario Draghi stated that the central bank would not cut interest rates again. Traders may also be realising that the ECB has no further tools available for further policy easing.
The reaction of the Euro will not be well received by the central bank. One of the main reasons for expanding asset purchases was to weaken the Euro.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.2814 during Thursday’s European session.
GBP/EUR Exchange Rate Forecast: German Inflation Data in Focus
Given the surprise strength of the Euro in the aftermath of extensive policy easing from the ECB, the outlook for the Euro is somewhat clouded. There is a chance that the single currency will dive as we enter Friday’s European session, but traders may continue to buy into the common asset amid expectations of no further stimulus measures from the Frankfurt-based central bank.
Friday’s German inflation data has the potential to cause GBP/EUR changes. However, the impact may be muted with traders continuing to digest today’s events.
In terms of British data, Friday’s trade balance and construction output data may cause Sterling volatility.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.3067 during Thursday’s European session.
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