The Euro to Pound Sterling (EUR/GBP) exchange rate rallied on Friday despite inflation falling to a new five-year low and unemployment remaining at 11.5%.
UK Prime Minister David Cameron’s speech on immigration continued to weigh upon the British Pound going into the weekend.
If data next week continues to come in weakly for the Eurozone, we can expect the currency to soften, as economists will no doubt raise their bets that the ECB is edging closer to introducing a quantitative easing programme.
With several significant domestic data publications over the coming week, the Euro to Pound Sterling (EUR/GBP) exchange rate is likely to be subject to heightened volatility.
Eurozone growth data and the Bank of England interest rate decision are of particular significance and have the potential to provoke changes.
Euro to Pound Exchange Rate Forecast to Soften on Monday
After German manufacturing moved below the 50 level which separates growth from contraction, the Euro to Pound Sterling exchange rate softened. Meanwhile, the Pound Sterling is subject to foreign currency movement as traders await domestic data due for publication later on Monday morning.
The Euro to Pound Sterling exchange rate is currently trending in the region of 0.7947.
European data has printed negatively on Monday, causing the single currency to soften against many of its major peers. Of particular detriment was the German Manufacturing PMI which declined from 50 to 19.5, moving into deficit territory.
British data on Monday has more potential to provoke volatility than that of the European data. Therefore, there is a higher likelihood of a Sterling appreciation. The UK Manufacturing PMI, Mortgage Approvals, Net Consumer Credit and Net Lending Securities on Dwellings will be of interest to those invested in the Pound.
EUR/GBP Exchange Rate to Extend Losses on Tuesday
Once again, British data outweighs European data on Tuesday. For those trading with the Pound, the Construction PMI will be of most interest.
The Eurozone Producer Price Index data has the potential to spark changes for the common currency as an early indicator of inflation.
With mounting anxieties surrounding cool economic growth in the Eurozone, the Eurozone Gross Domestic Product data will be of high importance on Wednesday. Many economists feel that it is likely to decline, however, which will see the single currency plummet across the board.
For those invested in the Pound Sterling, the Composite and Services PMIs and Official Reserves Changes data will be of interest.
EUR/GBP to Gain on Thursday?
The Bank of England Rate Decision will be the focus on Thursday. Given that they are very unlikely to alter the benchmark rate, the Pound is likely to slide amid disenchanted rate hawks.
However, if the BoE avoid increasing their Asset Purchase Target, sentiment towards the institution will improve as many major banks have had to use expansive measures to stimulate sluggish growth.
The European Central Bank rate decision will be of particular significance given the various troubles of late. Potential for monetary policy easing is becoming more and more apparent with several ECB officials discussing quantitative easing as the next step.
For those invested in the Euro; the German Construction PMI, German Retail PMI, Eurozone Retail PMI, ECB Deposit Facility and ECB Marginal Lending Facility will also be of importance.
EUR/GBP to Drop
Of most significance for the EUR/GBP exchange rate on Friday is the BoE Inflation for the next 12 months, which hit 2.8% previously.
For those trading with the common currency, however, non-seasonally adjusted German Factory Orders will be of significance.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7967 at the close of last week.
