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Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Mixed Data from Eurozone Raises Prospect of Quantitative Easing

Euro Currency Forecast

The Pound Sterling to Euro (GBP/EUR) exchange rate advanced on Thursday as more grim economic data releases out of the Eurozone increased pressure on the European Central Bank to introduce more monetary easing measures such as quantitative easing.

Data out of Germany sent the Euro falling after it showed that industrial orders in the Eurozone’s largest economy declined by 2.4% on a monthly basis in November, a far steeper decline than the one forecast by economists.

Economic sentiment in the currency bloc declined from 100.8 to 100.7 and industrial sentiment fell from November’s level of -4.3 to -5.2. Another report also showed that producer prices fell more than forecast on both a monthly and annual basis.

In Finland, business confidence fell from -7.9 to -8.2 and retail sales tumbled from a revised figure of 1.8% to -2%. Greece also caused concern as business and consumer confidence both fell more than expected.

Not all of the data out of the Eurozone was negative as retail sales in France, Portugal rallied strongly in November, and annual Eurozone retail sales figures came in better than expected.

Following the release of the data the Euro declined against all of its most traded peers, the currency is set to remain under pressure as the mixed PPI and retail sales data reinforces belief that the ECB will have to take action to tackle weak growth and the threat posed by deflation.

Many forecasters are now expecting that ECB policy makers will announce a full-scale quantitative easing programme over the coming months. Expectations for such an announcement have been one of the major factors for the single currency’s tumble against its major peers such as the US Dollar and Pound Sterling.

Bank of England Minutes in Focus

The Pound could soften later in the session if the statement, which will accompany the Bank of Englands interest rate decision, shows that policy makers are becoming more dovish over the health of the UK economy and suggests that an interest rate hike this year is unlikely.

The GBP/EUR exchange rate is trading in the region of 1.279