The Pound to Euro (GBP/EUR) exchange rate jumped to a three-week high on Wednesday as UK service sector PMI data beat forecasts and Chancellor George Osborne said that the UK economy will grow more than previously forecast this year. Market attention is now shifting to Thursday’s European Central Bank policy meeting, economists will looking for signs that the bank could be getting closer to introducing more easing measures.
Earlier on Wednesday the Pound to Euro (GBP/EUR) exchange rate went back onto the offensive and advanced as investors grew jittery ahead of Thursday’s ECB interest rate decision and press conference. Data out of France and Germany also weighed on the Euro as both nations service sectors slowed.
The Pound to Euro Exchange Rate is Trading In The Region of 1.274
The Pound to Euro (GBP/EUR) exchange rate gave up earlier gains on Tuesday as disappointing UK construction PMI data weighed upon Sterling. Despite that the currency pair is likely to advance as the ECB policy meeting draws closer, weak Eurozone PPI data has increased pressure on the bank to take more action.
Earlier On Tuesday the Pound to Euro (GBP/EUR) exchange rate continued to strengthen as investors turn their attention to Thursday’s upcoming European Central Bank (ECB) policy meeting. After Monday’s poor manufacturing data pressure is growing on ECB policy makers to introduce new measures to encourage growth and tackle deflation.
The Pound advanced against the Euro on Monday as data showed that manufacturing activity in the UK strengthened unexpectedly in November and activity in the Eurozone declined.
Data out of the Eurozone meanwhile showed that the regions top three economies of Germany, France and Italy all saw activity in their manufacturing sectors contract last month.
As the week gets underway the Pound to Euro (GBP/EUR) exchange rate firmed as traders began to turn their attention to Thursday’s European Central Bank (ECB) Interest rate decision and press conference.
The Pound Sterling to Euro (GBP/EUR) exchange rate is forecast to make further gains against next week as the single currency looks set to remain under pressure from this week’s weak inflation data and growing expectations that the European Central Bank (ECB) will introduce quantitative easing in 2015.
Euro Exchange Rate Weakened by Deflation Concerns
Concerns are growing that deflation will soon take root across the Eurozone. Data released on Thursday showed that annual inflation in the 18-member currency bloc’s largest economy (Germany) declined to its lowest level in close to five years in November, heightening fears that the risk of deflation occurring in the heart of the Eurozone remains.
The German data added to inflation data out of Spain which showed that the nation is on track to see a record fifth month of deflation. An initial estimate of inflation in the embattled nation showed that consumer prices fell by -0.4% compared with the preceding year.
The poor data out of the two nations led to economists raising their bets that inflation across the wider Eurozone would decline to a rate of just 0.3%, well away from the ECB’s target of 2% and matched the lowest figure seen since 2009.
QE Forecast to weigh on GBP/EUR Exchange Rate
The Pound remains under pressure and is likely to remain restrained as economists continue to speculate that the Bank of England will not hike interest rates until the third quarter of next year, six months later than previously expected.
A combination of weak wage growth and falling inflation because of a slowdown in China and the Eurozone looks set to cause the BoE to hold off increasing interest rates.
‘Following the recent downgrade of the BoE’s inflation forecasts, which I fully buy into, it is difficult to see the Monetary Policy Committee pulling the interest rate trigger any time soon,’ said an economist from Commerzbank.
UK PM David Cameron Weakens the Pound to Euro Exchange Rate
David Cameron’s speech on Friday weakened the Pound on Friday as it raised market concerns that the UK is edging closer towards an EU exit.
Cameron that if the UK’s demands fall on “deaf ears” he will “rule nothing out” – the strongest hint to date he could countenance the UK leaving the EU.
The Pound could rise against the Euro if Monday’s Markit/CIPs Manufacturing PMI data comes in strongly. Economists are forecasting the index to show signs of improvement.
A number of Eurozone PMI reports could soften the single currency if they disappoint. German and Eurozone wide data are due to be released.
Pound to Euro (GBP/EUR) Exchange Rate Forecast
The biggest events for the GBP/EUR exchange rate next week will be Thursday’s Bank of England Interest rate decision and European Central Bank rate decision and press conference.
Some of the major economic events that could impact the Pound Sterling to Euro (GBP/EUR) exchange rate forecast are listed below:
Monday December 1st – GBP – Mortgage approvals, Markit/CIPS Manufacturing PMI, EUR – Eurozone Manufacturing PMI, German PMI
Tuesday December 2nd – EUR – PPI data
Wednesday December 3rd – EUR –Eurozone Comp PMI, Services PMI, GBP – Markit Services PMI
Thursday December 4th – GBP – BoE Interest Rate and QE decision, EUR – ECB Interest Rate decision and Press Conference
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading at 1.25643.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trading at 795908.
