The Pound Sterling to Euro (GBP/EUR) exchange rate pushed beyond the 1.42 level this week before giving up ground at the end of the week. Next week we can expect the GBP/EUR exchange rate to experience another mixed week as a variety of factors are set to influence the currency pair.
As the week begins, the Euro could regain some ground if the latest Eurozone inflation and German economic sentiment index come in better than forecast. With the European Central Bank’s €1.1 trillion quantitative easing programme under way the regions inflation rate is expected to begin to show signs of improvement.
The report due on Monday however will show the inflation rate from February, before the QE programme was launched.
Economists are forecasting for a monthly inflation rate of -0.01% and an annual rate -0.3%. German sentiment data meanwhile is forecast to come in strongly as signs of a Eurozone recovery begin to sputter into existence.
The main event for the Pound comes on Wednesday with the release of the latest UK unemployment and average earnings data. A strong showing from those reports and the Pound will advance, as investors will likely raise their bets that the Bank of England will raise interest rates.
Also released will be the minutes from the Bank of England’s March monetary policy meeting.
Any sign that policy makers are edging closer to voting in favour of rate rises will also aid the Pound.
Data out of the Eurozone will include a region wide ZEW Economic sentiment index, construction output and balance of trade. The ZEW report is expected to show improvement as confidence that the Eurozone economy is beginning to improve rises.
As the week ends, the Pound could soften against the Euro if the latest CBI Business Optimism Index data shows a decline. Economists are forecasting for the index to fall from a reading of 15 to 14.03.
The GBP/EUR exchange rate will also be influenced by data from the USA and heightened concerns over a ‘Grexit’.
The Euro could be weakened if the Greek situation deteriorates further.
Also of importance to the Pound will be Friday’s Public Sector Borrowing Data.
Key Data Releases for GBP/EUR Exchange Rate
Tuesday March 17
EUR – Eurozone Inflation data
German ZEW reports
Wednesday March 18
EUR – Eurozone Sentiment Index
Eurozone Balance of Trade
Eurozone Construction Data
GBP – UK Unemployment rate
MPC Meeting Minutes
UK Average Earnings
Friday March 20
EUR – Eurozone Current Account
German PPI
GBP – UK CBI Business Optimism Index
UK CBI Industrial Trends Orders
