Risk of GBP/EUR Exchange Rate Drop on Falling UK GDP Stats
The Pound (GBP) has made a minor loss against the Euro (EUR) today, remaining close to last week’s lowest exchange rate by trading at €1.1360.
This deterioration is down to market uncertainty about the future stability of the UK economy; fears of a national dip might be realised as soon as Friday this week.
The main UK data out on the day will be finalised GDP readings for Q1 2018, which are expected to confirm that economic activity slowed at the start of the year.
This outcome has largely been hinted at by a struggling UK retail sector and other economic difficulties in Q1, but the news could still weaken Pound Sterling.
If it is confirmed that GDP growth slowed in the first three months of the year then GBP traders might assume that the rest of the year will be similarly difficult.
Will UK PMI Slowdowns Drag GBP/EUR Exchange Rate Lower?
Looking beyond the current week, the GBP/USD exchange rate could also be affected by a trio of UK PMI readings out on the 2nd, 3rd and 4th of July.
These measures of economic activity, respectively covering the manufacturing, construction and services sectors, are all predicted to show a slowdown during June.
None of the readings are expected to show an actual contraction in sector activity, but there could still be Pound Sterling losses if the figures show a decline.
The services reading is the most important of the three, as the sector as a whole is the largest single contributor to UK economic growth.
It includes key areas such as tourism, financial services and retail sales; a slowdown in June when tourism should be soaring would be a bad start to the summer season.
Euro to Pound Exchange Rate Forecast: Will EUR/GBP Struggle on Falling Confidence Scores?
While Pound Sterling (GBP) might struggle against the Euro (EUR) on Friday this week, there could be a more immediate Euro decline on Thursday.
A range of high-impact Eurozone economic confidence measures will be released on Thursday morning and all are predicted to show a decline in optimism levels.
As well as falling levels of business confidence, economists also forecast a drop in consumer confidence and overall economic sentiment about the Eurozone.
Such results risk causing reduced spending and investment in the Eurozone in the future, so a EUR/GBP exchange rate decline is possible if the stats print as expected.
EUR/GBP Exchange Rate Volatility ahead on Eurozone Inflation Rate Estimate
After Thursday’s confidence readings, the Euro to Pound (EUR/GBP) exchange rate could next be affected by Friday morning’s Eurozone inflation rate flash data.
Base inflation is predicted to rise slightly, but the core reading that excludes fuel and food sales is conversely expected to fall.
Most important is the predicted shift in base annual inflation from 1.9% to 2%, which would put inflation right on the European Central Bank’s (ECB) target.
An ECB interest rate hike is pencilled in for mid-to-late-2019 and if inflation hits the ECB target then this could be a more likely outcome.
The Euro may not rally on a higher base inflation estimate, but could still tick higher against Pound Sterling on such news.