Over the last five days the Pound has put in an impressive performance, advancing on almost all of its major rivals and achieving a three-week high against the Euro.
The turning point for the Pound to Euro (GBP/EUR) exchange rate came on Thursday, when UK retail sales smashed estimates and added to the case for the Bank of England increasing interest rates.
Pound Sterling was also supported as BoE official Martin Weale intimated that interest rates will return to normal levels as the economy recovers, and further Pound strength occurred on Friday as a gauge of UK consumer confidence achieved its strongest level since 2007.
The Euro, meanwhile, lost appeal as patchy economic data for the Eurozone, a strong domestic currency and inflation fears caused a spike in speculation surrounding the prospect of the European Central Bank introducing additional stimulus.
While the Euro recovered some losses at the close of the week as German consumer prices slowed by less than some investors anticipated, the GBP/EUR pairing headed for the close of local trading within touching distance of the previous day’s highs.
But what direction will the Pound/Euro pairing take next week?
Well, the main economic reports for the UK to be aware of next week include Markit manufacturing, construction and services PMI.
All three reports are expected to show reasonable growth this month, and if the results are in line with forecasts the Pound’s outlook will remain neutral-positive.
The Euro, on other hand, could be in for a far rockier week. While employment and retail sales figures for the Eurozone will be influential, investors will largely be focusing on Monday’s inflation report for the 18-nation currency bloc. Signs of a slowing in the Eurozone’s consumer price index in March will add to the pressure already mounting on the ECB.
On Thursday the central bank is due to meet and deliver its policy statement.
Last month the ECB shocked investors by refraining from introducing any additional stimulus measures, and the Euro broadly strengthened as a result.
While we could see the same outcome this month, if any of the upcoming economic data for the Eurozone fails to meet estimates the central bank may have no other choice but to implement a policy change.
If negative rates are brought in or policy is altered in any other way, the Euro could post widespread declines and the GBP to Euro pairing could hit fresh highs before next weekend.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6636 ,
Pound Sterling,,Euro,1.2096,
Pound Sterling,,Australian Dollar,1.7989,
Pound Sterling,,New Zealand Dollar,1.9200 ,
US Dollar,,Pound Sterling,0.6012,
Euro,,Pound Sterling,0.8265,
Australian Dollar,,Pound Sterling,0.5563,
New Zealand Dollar,,Pound Sterling,0.5215,
[/table]
Comments are closed.