This week has been less-than-ideal for the Pound to Euro (GBP/EUR) exchange rate. UK year-on-year industrial production was down from the forecast figure of 1.5% to 1.2%. Also, year-on-year manufacturing production was down from a forecast figure of 2.1% to 1.9%. This less-than-impressive set of data wiped out the positive effect of impressive UK Services PMI and was followed by the Bank of England’s (BoE’s) decision to leave the benchmark interest rate unaltered at 0.5%.
Sterling’s performance has been further tarnished as investors dwell on the possible implications of Scottish Independence.
Similarly the week has been difficult for the Euro. Poor German factory orders data coupled with second quarter contraction in the Italian economy left demand for the Euro somewhat dampened. Perhaps the only positive concerning the Euro is that, whilst its week was dissatisfying, market focus was on the more unfortunate Sterling.
Pound Sterling to Euro Exchange Rate (GBP/EUR) Forecast
Looking ahead there are some important data releases for the Euro next week.
Tuesday will see the release of the German Wholesale Price Index. Whilst this doesn’t have a significant impact on the market as a whole, wholesale prices can be used as an early indicator for inflation. Tuesday will also see the release of the German ZEW Survey for Economic sentiment, and the Eurozone ZEW Survey for Economic Sentiment. The Economic Sentiment Indicator assesses future economic expectations, thus the indicator provides a medium-term forecast for both the German and the Eurozone economy respectively.
Wednesday will be important for both the Euro and the Pound. The German Consumer Price Index holds significance because it is the most popular way to measure changes in purchasing power. Also, Eurozone Industrial Production is one to watch, although it is not expected to have a huge impact as the industrial sector contributes to only a quarter of the Eurozone GDP.
UK data on Wednesday is much more likely to increase volatility. The Jobless Claims Change report will be a good indicator of economic growth (or lack thereof). Also important in terms of UK economic growth is the ILO Unemployment Rate. A lower Unemployment Rate translates into more income-earning workers and greater consumption. Increased expenditure accelerates economic growth, but can also heighten inflationary pressures.
Thursday has many data releases significant to the Euro. Chief amongst those is the German Gross Domestic Product report. Germany, being the most powerful nation within the 18 nation bloc, has a huge influence over the performance of the Eurozone and consequently the Euro.
Friday will see an important data release from a UK economic standpoint. Year-on-year Gross Domestic Product is an indicator for broad overall growth in the United Kingdom. Robust UK GDP growth signals a heightened level of economic activity, and therefore could increase demand for currency and boost the Pound Sterling to Euro exchange rate.