The Pound Sterling to Euro (GBP/EUR) exchange rate is forecast to trade in a tight range next week as UK political uncertainty is likely to weigh on the Pound and as concerns over Greece are likely to maintain pressure on the single currency.
With recent economic data suggesting that the Eurozone economy is finally starting to show signs of improvement, the Euro will likely be influenced by geopolitical events, chief of which will be the situation in Greece.
‘The outlook for European markets is better than it has been for years and the risks now are largely political,’ said Christian Schultz, senior economist at Berenberg Bank.
As the week came to end on the 20th, the Euro regained ground against the Pound and other peers as Athens promised to deliver new economic reform plans to its creditors in the European Union. Talks held in Brussels dragged on beyond 2 am in the morning on Friday as ministers managed to get the Greek government to agree to create a new list of reform measures.
According to reports, the new reform measures will have to be ready by Friday 27 so that Eurozone finance ministers can go over the proposals.
On Monday, the Pound is forecast to trade in a tight range against the Euro and other peers as economists expect the latest CBI Business Optimism Index to weaken from 15 to a reading of 14.0. A separate CBI Industrial Trends Orders report meanwhile is expected to show signs of improvement. Later in the session, the Euro is likely to see volatility due to the release of a flash Eurozone consumer confidence index.
Tuesday’s session will be the most important day of the week for the Euro due to the publication of a large number of Purchasing Managers Index reports.
If the data shows that activity in the Eurozone’s manufacturing and service sectors increased in March then the currency will move higher. The session will also create volatility for the Pound, as the UK will publish inflation and producer price inflation (PPI) data.
The main data released on Wednesday will be German IFO reports and UK Mortgage approvals data. On Thursday, the Pound will experience movement due to the release of retail sales reports.
On Friday, the Pound is forecast to soften as Gfk Consumer Confidence data is expected to fall from a reading of 1 to -1 in March.
