The Euro to Pound Sterling (EUR/GBP) and Euro to US Dollar (EUR/USD) exchange rates gained in Wednesday’s European session ahead of UK Unemployment Rate, Employment Change and Average Weekly Earnings figures, Bank of England (BoE) minutes and the Federal Open Market Committee (FOMC) interest rate announcement.
Earlier… The Euro to Pound Sterling (EUR/GBP) and Euro to US Dollar (EUR/USD) exchange rates both recorded gains on Tuesday after ZEW’s German and Eurozone economic surveys printed favourably.
The ZEW German Current Conditions Index rose from 45.5 to 55.1 in March—higher than the 52.0 forecast. In addition, the German Economic Sentiment Index rose from 53.0 to 54.8—a little shy of the 59.5 prediction, but still favourable at a 13-month high.
Economist Carsten Brzeski commented: ‘Today’s ZEW index shows that – at least in the eyes of the financial market participants – the German economy had left all growth concerns behind and is enjoying its first moments of Spring fever.’
Meanwhile, ZEW’s Eurozone Economic Sentiment Index jumped far higher than predicted, coming in at 62.4 in March from February’s 52.7. A softer increase to 54.9 was forecast.
In addition, the final Eurozone Core Inflation Rate beat estimates when it reached 0.7% in February rather than the 0.6% initially forecast.
FOMC and BoE to Influence EUR/GBP, EUR/USD Exchange Rates
Meanwhile, the Pound Sterling and US Dollar are both awaiting central bank action on Wednesday in what could potentially be the biggest day for foreign exchange movement this week.
Both the Bank of England (BoE) and US Federal Reserve are in the running to hike interest rates this year and would be the first central banks to increase borrowing costs in the Group of Seven (G7) since the onset of the global financial crisis.
The BoE will publish its March meeting minutes on Wednesday and any divergence amongst policymakers could see the Pound rally—however, after several hawkish statements, BoE Governor Mark Carney has become slightly more dovish on the topic of rate hikes, again.
Carney is renowned for being the ‘unreliable boyfriend’ when it comes to interest rate increases and markets are finding his statements hard to navigate in terms of a rate hike timeframe.
Meanwhile, the Federal Reserve has been much clearer about interest rate increases—Chairwoman Janet Yellen has been consistent and attempted to keep markets calm as the Federal Open Market Committee (FOMC) suggest they can be ‘patient’ before making any adjustments to the bank rate.
Euro to Pound Sterling (EUR/GBP) and Euro to US Dollar (EUR/USD) Exchange Rate Forecast
The EUR/GBP, EUR/USD exchange rates could fluctuate on Thursday with the release of the European Central Bank’s (ECB) Economic Bulletin.
However, Wednesday’s Euro to Pound Sterling (EUR/GBP) exchange rate movement may be more pronounced with the release of UK Unemployment Rate, Average Weekly Earnings and Employment Change figures. Any favourable UK data could enable the Pound Sterling to climb.
The Euro to US Dollar (EUR/USD) exchange rate is trading at 1.0612. The Euro to Pound Sterling (EUR/GBP) exchange rate is trending in the region of 0.7188.
