Pound to Euro Exchange Rate Outlook Becoming Focused on Eurozone Inflation
Despite some decent UK data this week, the Pound to Euro (GBP/EUR) exchange rate continued to see mixed trade on Thursday. Euro (EUR) investors highly anticipated upcoming inflation stats from Eurozone nations.
Since opening the week at the level of 1.1434, GBP/EUR has fluctuated between highs of 1.1469 and lows of 1.1369. During Thursday morning trade the pair trended closely to the level of 1.1400.
Despite the pair trending below the week’s opening levels for now though, GBP/EUR could still advance by the weekend depending on the results of Eurozone inflation projections.
German Consumer Price Index (CPI) projections for March will be published on Thursday afternoon, followed by French and Italian inflation projections on Friday. The Eurozone’s overall inflation projection will be published next Wednesday.
Spain’s inflation projections disappointed investors earlier in the week, falling short of forecasts in both prints.
The data worsened concerns that Eurozone inflation was still subdued and that the European Central Bank would have little reason to turn hawkish on monetary policy any time soon. This has left the Euro unappealing.
Pound (GBP) Exchange Rates Slip despite Solid UK Growth Results
Sterling (GBP) saw slightly weaker performance on Thursday and was unable to hold its ground against the Euro, despite most of the day’s UK data being generally optimistic.
Thursday saw the publication of Britain’s final Q4 2017 Gross Domestic Product (GDP) results, which met expectations. The quarter-on-quarter figure slipped from 0.5% to 0.4% as expected, while the yearly figure slipped from 1.8% to 1.4% as projected.
While this had little influence on the Pound outlook, UK business investment beat expectations in both prints.
Quarterly business investment only slipped from 0.9% to 0.3%, rather than the expected 0%. The yearly figure climbed from 1.9% to 2.6% and past the projected 2.1%.
GfK’s March UK consumer confidence results also beat expectations, improving from -10 to -7.
Despite this, Pound remained pressured by some end-of-quarter Brexit jitters. With the UK set to leave the EU a year from today, markets were anxious that UK-EU trade discussions had still not fully begun.
Pound to Euro (GBP/EUR) Forecast: Eurozone Inflation and UK PMIs in Focus
Over the next week, Eurozone inflation could hit headlines again – particularly if March’s inflation projections surprise markets in some way.
Spanish inflation already disappointed investors and indicated that the bloc’s inflation may still be too subdued to support any tighter European Central Bank (ECB) monetary policy any time soon.
However, if upcoming Eurozone stats beat expectations bets of ECB hawkishness could rise and the Euro could strengthen.
French and Italian Consumer Price Index (CPI) projections on Friday could influence the Euro outlook, but the biggest reactions are likely to come from German inflation and next week’s overall Eurozone projection.
The Eurozone’s overall March inflation prediction will be published next Wednesday, alongside the bloc’s February unemployment rate report which may influence Euro trade slightly too.
Other Eurozone data that could potentially influence GBP/EUR next week includes retail sales and March’s final Eurozone PMIs from Markit.
Speaking of PMIs, Markit will also publish March’s UK PMIs next week. These are likely to be the week’s most influential datasets for Pound investors.
Sterling investors will of course be focused on potential Brexit developments as always. With less than a year to go now until the UK is set to formally exit the EU, markets are hoping for full UK-EU trade talks to finally get underway soon.