Pound to Euro (GBP/EUR) Exchange Rate Forecast to rise back above key 1.20 level

The Pound to Euro exchange rate (GBP/EUR) rose to a one-week high on Thursday and is pushing to breach the psychologically key 1.20 level as disappointing data out of the Eurozone weighed upon the single currency.

Sterling found support during the session from a report which showed that British factory orders increased more than expected in March.

According to the Confederation of British industry’s survey, the total order book balance increased to +6 in March, up from the +3 seen in February and beat the +5 forecast by economists. Putting a slight dampener on the report was the news that exports slipped this month with the export order book falling to -10 from -1, the fall in exports highlights the challenges faced by UK manufacturers.

The fall could be a result of the crisis in the Ukraine and worries over a possible slowdown of the global economy.

“The picture in the manufacturing sector remains positive. Overall, demand continues to rise and output growth is robust. Growth in exports is crucial to rebalancing the economy and ensuring a sustainable recovery. Measures announced in yesterdays budget should help businesses to break into new, faster growing markets and underpin an improvement in the UK’s export performance,” said the head of economic analysis at CBI.

The Euro meanwhile fell after a report released early in the session showed that producer prices stagnated in Germany in February. On a yearly basis prices fell sharply. According to official data released by Destatis the total producer price index remained unchanged on a monthly basis but tumbled by 0.9% on a yearly basis.

Also weighing upon the single currency was the publication of a report which showed that unemployment in the Netherlands increased unexpectedly last month. The jobless rate climbed from 8.6% to 8.8% highlighting the issue of high unemployment across the Eurozone and dampened optimism over the regions recovery.

Against the US Dollar the Euro tumbled to a fresh two-week low due to expectations that the US Federal Reserve will raise interest rates sooner-than-expected. The ‘Greenback’ is likely to strengthen further if the afternoon’s jobless claims data comes in positively.