Foreign exchange investors witnessed the British pound to euro conversion rate slide to a fresh three-year low last week on additional poor UK economic data. We examine the latest euro-related fx forecasts targeting the sterling and the US dollar in the short, medium and long-term GBP/EUR forex outlooks.
- The British Pound to Euro exchange rate today: -0.42pct at 1.15139 (weekly best of 1.1792)
- The Euro to Pound exchange rate today: 0.86852.
- The Euro to Dollar exchange rate today: 1.11825.
- Lloyds Bank forecasts see GBP/EUR as 10 per cent undervalued on divergence.
- Key policy rates in the euro area and Japan are predicted to remain unchanged.
A slew of below-forecast UK economic data last week sent the GBP/EUR sharply lower, enabling the single currency to reach the best levels seen in three years.
The sterling-euro rate tested lows of 1.157 and remains close to these levels ahead of the new trading week.
Industrial and manufacturing production, trade balance figures and construction output for June all came in below forecasts, as did July’s NIESR GDP estimate and the RICS House Price Balance.
Growing expectations of further monetary policy easing from the Bank of England (BoE) also weakened the British Pound, with formerly hawkish policymaker Ian McCafferty writing in The Times that further easing may be necessary in the coming months.
Latest Pound/Euro Exchange Rates
On Saturday the Pound to British Pound exchange rate (GBP/GBP) converts at
1
The pound conversion rate (against pound) is quoted at 1 GBP/GBP.
At time of writing the pound to us dollar exchange rate is quoted at 1.237.
FX markets see the pound vs canadian dollar exchange rate converting at 1.701.
At time of writing the pound to swiss franc exchange rate is quoted at 1.126.
The pound conversion rate (against australian dollar) is quoted at 1.928 AUD/GBP.
Please note: the FX rates above, updated 20th Apr 2024, will have a commission applied by your typical high street bank. Currency brokers specialise in these type of foreign currency transactions and can save you up to 5% on international payments compared to the banks.
British Pound (GBP) Dives vs Euro (EUR) After Recent Eurozone data largely boosted Single Currency.
Overall, last week’s Eurozone data showed strong economic progress, with German industrial production, trade balance and current account and Eurozone investor confidence all printing above expectations.
Inflation data released on Thursday kept bets of further
European Central Bank (ECB) stimulus high, however, with consumer price data on Wednesday adding yet more gloom to the currency bloc’s inflation outlook.
Friday’s high-impact data slew was mixed, showing bullish German GDP growth of 3.1% year-on-year in the second quarter, although Italian GDP for the same period stagnated on the quarter, while yearly growth weakened to 0.7% instead of falling as forecast from 1% to 0.8%.
GBP/EUR Exchange Rate Could See Further Volatility on UK House Prices
House prices, consumer prices and government borrowing figures are likely to weigh on the GBP/EUR exchange rate over the coming week.
Monday could see the Rightmove House Prices index weaken Pound Sterling in a similar way to last week’s RICS House Price Balance, should it show a significant slowdown in price growth.
Consumer price index figures for July are due on Tuesday; while it will be a while before the impact of weak Sterling is truly felt on price growth, markets are likely to make a big deal out of the figures, generating strong GBP exchange rate movement.
There is plenty more UK data due over the next few days, with unemployment and wage data on Wednesday being followed by retail sales figures on Thursday and government borrowing reports on Friday.
Credit Suisse Sees Bullish Euro (EUR) Exchange Rates Ahead
According to Credit Suisse, there is a bullish outlook for the EUR/GBP exchange rate in the near to medium-term outlook;
‘EURGBP has extended its rally from support at .8252/43 and we remain bullish for a break above the July 2016 high at .8640 to test the 61.8% retracement of the 2008/15 fall at .8706, potentially .8816. We would expect a cap at the latter level. Below .8252/43 can see a retreat back to 8120/18, potentially .8000/.7995, but with a floor expected here.’
However, there could be bearish notes in market sentiment as well, following the weak inflation data from France, Italy and Ireland last week.
Expectations of further policy easing from the European Central Bank (ECB) later in the year could weigh on the Euro going forward, with Commerzbank noting;
‘As euro zone core inflation should tend to disappoint, we expect the ECB to once again loosen its monetary stance later in 2016.’
Key GBP and EUR Related Economic / Forex Events This Week
This week's euro-focused events include the German ZEW Economic Sentimentsource, Trade Balancesource, Current Accountsource, Final CPI, ECB Monetary Policy Meeting Accounts and the German PPI source.
This week's sterling-focused events include the Rightmove HPI source, UK CPIsource, PPI Input, RPI, Core CPI, HPI, PPI Ouput, Average Earnings Index source, Claimant Count Changesource, Unemployment Rate, UK Retail Sales and the Public Sector Net Borrowing.
Lloyds bank Pound Euro Exchange Rate Forecasts 2016-2017
"Our estimates suggest that the decline in GBP/EUR since the UK’s EU referendum has left GBP approximately 10% undervalued."
"In part, this divergence reflects the rise in political uncertainty and the associated increase in risk premia since the referendum. "
"While the recently announced policy measures from the Bank of England argue for a weaker sterling, the strong likelihood of an extension to the ECB’s QE programme suggests that the ECB’s balance sheet will continue to expand at a more rapid pace than that of the Bank of England, which on a relative basis argues for higher GBP/EUR."
"Overall, we expect GBP/EUR to drift gradually higher towards 1.19 by year end, rising to 1.27 by the end of 2017."
Sterling Edges Lower on House Price Index
Demand for the Pound Sterling remained limited at the start of the week thanks to an unimpressive Rightmove House Price Index report, which indicated that prices continued to weaken in August.
This did not encourage particular confidence in the outlook of the UK economy, prompting investors to continue selling out of the GBP/EUR and GBP/USD exchange rates.
The Pound continued its tumble as Monday progressed following a week of solid losses, meaning that the outlook for the British currency will continue to be dire if this week’s data reflects the UK’s post-Referendum economic struggles.
Sterling slipped lower even against a weak US Dollar as investors adjusted ahead of Tuesday’s highly anticipated UK inflation figures for July. GBP/EUR dropped closer to the key level of 1.14.