The Euro to Pound Sterling (EUR/GBP) exchange rate was trending within a tight range on Friday morning.
Although German data printed positively on Friday morning, the Euro is generally holding steady versus many of its major peers. This is due to continued concern that the European Central Bank’s quantitative easing program will only delay economic struggles in the Eurozone.
The Pound, meanwhile, is also holding steady versus many of its most traded currency rivals as traders await British inflation data. A slight Sterling appreciation can be attributed to positive sentiment towards the Bank of England (BoE) after policymakers were reassuringly confident that deflation was a temporary issue.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7228.
Yesterday…
The Euro to Pound Sterling (EUR/GBP) exchange rate softened by around -0.21% on Thursday morning.
Given the high likelihood that the European Central Bank (ECB) will keep policy unchanged during the forthcoming interest rate decision, the accompanying press conference will take precedence in terms of its significance. Most economists expect President Mario Draghi to announce the timing of the launch of quantitative easing. The shared currency declination is as a result of some traders fearing that the ECB will not be able to source the bonds required to fund the program.
The Pound, meanwhile, fluctuated versus its major competitors as traders await the Bank of England (BoE) rate decision. Similar to that of the ECB, most don’t expect any policy changes; especially with mounting political uncertainties as we approach the general election. However, the recent succession of positive data results could see a reduction in the Asset Purchase Target.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7246.
Euro (EUR) Exchange Rate Weakens ahead of Rate Decision
As mentioned above, the ECB rate decision is likely to be overshadowed by the accompanying press conference. Given that the institution has seen dwindling sentiment due to its opacity, opinion is still very much divided whether the massive injection of €1 trillion into the Eurozone will be viable amid a lack of bonds to purchase.
‘The combination of deposit rates negative and QE is a very potent one, so it’s very Euro negative,’ said Robin Brooks, chief currency strategist at Goldman Sachs. ‘We have in our forecasts a very pronounced Euro downswing, which is probably the most Dollar-bullish forecast in all of our forecasts.’
Domestic data has had minimal impact on the shared currency with the launch of QE dominating trader focus.
The Euro to Pound Sterling (EUR/GBP) exchange rate dropped to a low today of 0.7236.
Pound Sterling (GBP) Exchange Rate Fluctuates ahead of BoE
Given that the forthcoming general election is generating mounting political uncertainties, BoE policymakers are unlikely to make any hawkish moves during the rate decision meeting. However, most agree that if policy doesn’t dramatically change post-election, then the British economy is looking healthy enough to accommodate a lending rate increase.
‘Just domestically you can see a case for saying, actually we’ve had enough of emergency rates,’ Kate Barker, a former BOE policy maker said in an interview on Bloomberg Television’s ‘Countdown’. ‘But there are some headwinds. The weakness of the Euro. There must be some concern about how strong you want Sterling to be against your major trading partner and I’m sure that will be on the Bank’s mind today.’
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Fluctuate
Given the mounting unknowns regarding QE viability in the Eurozone, and with uncertainties about how the BoE will approach policy ahead of the general election, the Euro to Pound Sterling (EUR/GBP) exchange rate is likely to fluctuate.
Friday will see heightened EUR/GBP volatility with the BoE 12-month Inflation Target and fourth-quarter Eurozone Gross Domestic Product data due for publication.
The Euro to Pound Sterling (EUR/GBP) exchange rate advanced to a high today of 0.7262.
