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Pound Sterling to Euro (GBP/EUR) Exchange Rate Tumbles from Year Best on Signs of Strength in Eurozone Outlook

European Central Bank

Pound to Euro Exchange Rate Still on Track to Sustain Major Gains This Week

Following days of surges due to fading no-deal Brexit fears, the Pound Sterling to Euro (GBP/EUR) exchange rate slipped from its best levels in over a year today. A combination of profit-taking and a stronger Euro (EUR) caused the slide.

Rising market confidence that a no-deal Brexit would be avoided have boosted GBP/EUR by over a cent this week, pushing the pair from the week’s opening level of 1.1520 to trend close to the level of 1.1664 at the time of writing.

Yesterday, before investors sold GBP/EUR from its best levels, the pair touched a high of 1.1717. This was the best level for the pair in over a year – since May 2017.

However, market speculation that the Eurozone’s economy may be taking a slightly more positive turn left the Euro more appealing today and this pushed the Pound to Euro exchange rate back down from its best levels.

Pound (GBP) Exchange Rates Take a Breather after Two Days of Surges

Since Tuesday, investors have been piling into the Pound on rising expectations that the UK will avoid crashing out of the EU with a worst-case scenario no-deal Brexit.

As the UK government have revealed the option for Parliament to officially vote that it does not favour a no-deal Brexit, as well as a potential vote on an extension of the Brexit process, markets became more confident that a no-deal outcome would be avoided.

Sterling surged as no-deal Brexit bets lightened, but the Pound rally ran out of steam today. Investors opted to sell the British currency back from its best levels and take profit from its recent highs.

Brexit speculation continued to bubble away in the background, but with no-deal Brexit jitters lightening the Pound is likely to sustain most of this week’s gains.

Euro (EUR) Exchange Rates Rebound on Fresh Economic Hopes

For most of the week, the Euro had been unappealing as Eurozone data has done little to impress investors lately. However, the Euro benefitted from the Pound’s weakness today thanks to speculation that things may be turning around.

Due to factors like strong European bond yields and broad indications of European ecostats edging higher, markets showed signs of confidence that the Eurozone economic outlook was improving.

Analysts note that if Eurozone data does improve soon, bets that the European Central Bank (ECB) could still hike Eurozone interest rates before the end of the year could rise too.

Speculation that the Eurozone economy could be about to take a positive turn was all it took for investors to find the Euro more appealing today.

Pound to Euro (GBP/EUR) Exchange Rate Outlook to be influenced by Key Eurozone Data

While hopes that the Eurozone economic outlook is strengthening slightly supported the Euro today, the shared currency’s potential for gains could be nipped in the bud if upcoming Eurozone data comes in well short of expectations.

Multiple notable Eurozone ecostats will be published on Friday and are likely to drive Pound to Euro exchange rate movement if they surprise investors.

Germany’s January retail sales results and February unemployment rate figures will be published, and Germany’s manufacturing PMI from Markit could be particularly influential.

Other manufacturing PMIs from across the Eurozone as well as the UK will be published tomorrow, and the Eurozone’s February inflation rate could influence European Central Bank (ECB) interest rate hike bets if it surprises investors.

Overall though, unless there is surprisingly strong Eurozone data tomorrow the Pound to Euro (GBP/EUR) exchange rate is likely to sustain most of this week’s strong gains.