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Higher UK GDP Estimate Boosts Pound Euro Exchange Rate

Euro Currency Forecast

While Brexit jitters persisted the Pound Euro trended higher ahead of the weekend on the back of a raft of generally positive UK data.

Particularly encouraging was the NIESR gross domestic product estimate for the three months to October, which pointed towards a fresh uptick in growth.

If the fourth quarter UK GDP data can replicate this growth of 0.5% this would see the economy end the year on a much stronger footing, reversing some of the damage of a weak first half.

As Amit Kara, Head of UK Macroeconomic Forecasting at NIESR, noted:

‘Although economic growth is likely to be stronger in the second half of this year compared with the first, it is important to note that activity has slowed since last year.

‘We expect the pattern of demand in the UK economy to rebalance towards international trade in response to strengthening global growth and weaker sterling and away from domestic demand.

‘If the economy continues to expand at this pace and inflation remains elevated, there is a case for the Bank of England to gradually raise the policy rate to stop the economy from overheating.’

However, any signs of softening in the latest UK consumer price index and average weekly earnings figures could return the GBP EUR exchange rate to a downtrend in the coming week.

Stronger German Growth to Boost Euro Exchange Rates

A weakening US Dollar offered some support to the Euro, meanwhile, as the Trump administration’s tax reforms looked set to take a little longer to materialise than markets have hoped.

Even so, the GBP EUR exchange rate remained on a stronger footing as investors began to brace for the latest commentary from European Central Bank (ECB) President Mario Draghi.

While Draghi is unlikely to offer any particular surprises in his appearance on Saturday any reaffirmation of his dovish outlook could see the Euro trending lower against its rivals.

Confidence in the Eurozone economy is likely to pick up once again, though, if Germany’s third quarter gross domestic product proves encouraging.

Any fresh signs of accelerating growth may give EUR exchange rates a strong boost, adding weight to the European Commission’s upwards revision of its economic forecasts.

On the other hand, if the Eurozone’s powerhouse economy fails to gain further momentum this could prompt some selling of the single currency.

Current GBP EUR Interbank Exchange Rates

At the time of writing, the Pound Euro exchange rate was on a bullish run around 1.331. Meanwhile, the Euro Pound exchange rate was slumped in the region of 0.8824.