The Pound to Euro exchange rate looks set to push higher next week due to a lack of Eurozone centric data and as investors look ahead to Thursday’s Bank of England Interest rate decision.
The single currency is likely to remain under pressure from Thursday’s comments by European Central Bank President Mario Draghi who talked down the threat of deflation to the Eurozone. With a number of inflation reports due next week his comments are likely to come under further scrutiny.
The start of the week promises to be fairly muted for the currency pair due to a lack of domestic data out of the UK and important reports out of the Eurozone. Investors will want to pay attention to Industrial production data out of Germany however as economists are predicting that output fell in February. If true then the Euro is likely to add to its losses sustained last week.
On Tuesday the Pound is forecast to push higher against several major peers as data is expected to show that manufacturing and industrial production continued to increase in February. Year-on-year figures are forecast to show an improvement compared to the previous months.
Midweek sees the release of balance of trade figures for both the UK and Germany. The UK’s trade deficit is forecast to have narrowed whilst Germany is expected to make improvements to its trade surplus and current account surplus. The Euro could edge higher if the figures come in better-than-expected.
Thursday will be dominated by the Bank of England rate decision. In the morning however there are a number of inflation reports due from Eurozone member nations. Investors will be looking for further signs of weakening inflation in the Eurozone. The BoE is forecast to leave interest rates unchanged at 0.5% and maintain its quantitative easing programme at £375 billion.
The Euro is likely to weaken on Friday due to a lack of UK domestic data and inflation data out of Germany which is forecast to show another fall, raising concerns over the threat of deflation in the Eurozone.
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