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Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Surge after UK Government Budget Deficit Narrowed

Euro Currency Forecast

GBP/EUR Conversion Rate Predicted to Rally despite Weaker-than-Anticipated Retail Sales

The Pound Sterling to Euro (GBP/EUR) exchange rate advanced by around 1.1% on Friday afternoon.

Although December’s British Retail Sales only saw annual growth of 2.1%, missing the median market forecast 3.5% growth, the Pound rallied versus nearly all of its most traded rivals. The appreciation can be linked to a surprise result from Public Sector Net Borrowing data which saw the budget deficit reduced beyond expectations in December. However, most economists agree that the total government spending will still exceed Chancellor George Osborne’s target.

‘Today’s figures show that borrowing is down compared to last year, as a number of one-off factors that have affected the data in recent months have unwound,’ the Treasury said. ‘But there is more to do. At a time when we face a dangerous cocktail of risks from the global economy, we must continue to work through our plan to deliver a surplus and provide economic security for working people.’

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3239.

EUR/GBP Conversion Rate Predicted to Dive after Eurozone PMIs Disappointed

The single currency softened versus the majority of its most traded rivals during Friday’s European session. The depreciation can be linked to less-than-ideal domestic data. Both German and Eurozone Services, Manufacturing and Composite PMIs all failed to meet with respective median market forecasts. Even though the data are still considered robust, investor confidence was already dented from a speech by European Central Bank (ECB) President Mario Draghi. The speech amplified trader speculation that the Frankfurt-based central bank will look to loosen monetary policy in March.

Commenting on the Eurozone Composite PMI data, Chris Williamson, Chief Economist at Markit said: ‘It would be wrong to get too worried. The survey data are consistent with GDP rising at a steady quarterly rate of 0.3-0.4% at the start of the year. Firms also appear to be looking to brighter times ahead, with business confidence improving, linked in turn to backlogs of work rising at the fastest rate since the spring of 2011. With plenty of orders-in hand to work through, hiring remained encouragingly resilient at the start of the year. Discounting, linked to the 15% drop in oil prices in the survey period compared to a month ago, will also help boost sales, especially as the fall in households’ fuel bills should free up more income to spend on other goods and services.’

The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3086 today.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Gains as Global Stock Prices Rise

The mention of additional stimulus from the ECB has caused European stocks to rise. Tracking these gains, the Pound Sterling is likely to hold its position of strength over the common currency for the remainder of Friday’s European session. This is especially true given the absence of further economic data to provoke volatility. With that being said, however, any significant surprise from US data may stimulate market movement.

The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.3287 during Friday’s European session.