Risk of GBP/EUR Exchange Rate Decline on UK Inflation Rate Acceleration
The Pound (GBP) steadily rose against the Euro (EUR) last week, but the week ahead could see Sterling face difficulties in the pairing.
The main data to watch out for will be Wednesday’s inflation rate stats for April.
These are predicted to show rising price growth across the board, whether for the month-on-month or year-on-year readings.
Higher inflation greatly increases the risk that UK households will face wage squeezes once again, having only just escaped from the condition earlier this year.
Wage squeezes can have a restricting effect on the economy over time, causing consumers to reduce spending and ultimately for GDP growth to slow.
As such, if inflation rises sharply next week then the Pound to Euro (GBP/EUR) exchange rate could drop due to returning fears among traders.
Forecast-Beating UK GDP Data could Cause GBP/EUR Exchange Rate Advance
The coming week will end with the release of high-impact UK GDP data on Friday; this is expected to show slowing economic activity in the first quarter of the year.
Such results could extend any existing Pound to Euro (GBP/EUR) exchange rate losses, although there is a chance of these forecasts being incorrect.
If growth doesn’t slow by as much as expected then the Pound (GBP) could advance against the Euro (EUR).
Some form of slowdown seems likely given the poor weather conditions in early 2018, but better than expected results may still be enough to raise demand for the Pound.
Weekly Euro Forecast: Will EUR/GBP Exchange Rate Fall on Eurozone PMI Disappointment?
There is a danger of the Euro (EUR) making additional losses against the Pound (GBP) in the coming week, when Eurozone PMI activity readings come out on Wednesday.
The Eurozone-wide services, manufacturing and overall composite figures are tipped to show slowing activity which could lower confidence in the Euro.
Potentially amplifying Euro losses, German economic activity is also predicted to have fallen in May.
The day’s later consumer confidence flash for May might add to a potential drop in Euro trader confidence, if it shows a decline instead of the forecast stagnation.
Will Falling German Business Confidence Add to EUR/GBP Exchange Rate Volatility Next Week?
Another factor which could increase Euro to Pound (EUR/GBP) exchange rate turbulence next week will be Ifo measures of German business confidence on Friday.
These are forecast to show falling readings for current conditions, expectations and for the business climate.
While the expected declines aren’t massive, they could still unsettle Euro traders later in the week and raise the chance of tentative GBP/EUR exchange rate gains.
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