Could the Pound to Euro Exchange Rate Push above 1.21 Next Week?

On Friday the Pound to Euro exchange rate closed trading lower having fallen back below the key 1.20 Euro level.

Last week was all about the US Dollar, with American policy changes and economic data driving the majority of market movement, but in the week ahead Europe will be in the spotlight once more.

The Euro has been receiving underlying support since the European Central Bank opted to leave stimulus unaltered at its latest policy meeting.

At the close of the week the common currency was also able to pare declines against a bullish US Dollar as a gauge of consumer confidence for the Eurozone showed better-than-forecast improvement and the currency bloc’s current account surplus grew.

In the view of one strategist with Credit Agricole; ‘There is a reassessment of Fed rate hike expectations that is taking place which is keeping the Dollar pegged back. The Euro, on the other hand, is being supported by inflows into European sticks, and together with the current account situation, we should see a bit of upside in the Euro.’

However, if the upcoming Eurozone data adds to the case for the ECB introducing an additional rate cut the Euro could reverse its recent gains and give the Pound time to find its feet again.

Subdued price gains are one of the biggest headwinds facing the Eurozone and German inflation data is due for publication on Friday. Signs of slowing inflation in the currency bloc’s largest economy could put the Euro under pressure and allow the GBP to Euro pairing to climb.

But could the Pound push above 1.21 against the Euro? Well, that really depends on this week’s most influential UK reports, including the nation’s inflation data, retail sales figures and GDP.

Strong sales growth or better than previously estimated fourth quarter expansion could give the Pound the boost it needs to push out of its recent narrow trading range and brush multi-week highs against the Euro.

In January poor weather saw UK retail sales slump by 1.5 per cent month-on-month so economists will be hoping for a rebound in February.

Fourth quarter GDP is expected to come in at 0.7 per cent quarter-on-quarter and 2.7 per cent year-on-year.

Other Eurozone data to be aware of includes German/Eurozone manufacturing and services PMI, a German business climate report, the German GfK consumer confidence survey and German retail sales data.

Pound (GBP) Exchange Rates

[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate , 
Pound Sterling,,US Dollar,1.6491 ,
Pound Sterling,,Euro,1.1959,
Pound Sterling,,Australian Dollar,1.8147,
Pound Sterling,,New Zealand Dollar,1.9279 ,
US Dollar,,Pound Sterling,0.6064,
Euro,,Pound Sterling,0.8362,
Australian Dollar,,Pound Sterling,0.5506,
New Zealand Dollar,,Pound Sterling,0.5181,
[/table]