GBP/EUR Forecast: 1.16 For Pound To Euro Exchange Rate Buyers Next Week?

Despite some stronger than expected UK data towards the end of last week, the British Pound to Euro (GBP/EUR) exchange rate trended lower. Investors are gradually finding the Euro more and more appealing, as various factors boost market optimism about the Eurozone’s potential to accelerate its recovery from the coronavirus pandemic over the coming quarter or so. Looking ahead to next week, the Euro could strengthen even further if upcoming Eurozone data impresses investors.

After opening last week at the level of 1.1549, GBP/EUR spent most of the week higher as the Pound attempted to advance again.

However, after hitting a fortnight high of 1.1639 earlier in the week, GBP/EUR spent the rest of the week tumbling. In fact, toward the end of the week, GBP/EUR fell below the week’s opening levels, near a weekly low of 1.1498.

This wasn’t far from the previous week’s lows of 1.1471, which was the worst level for the pair in a month.

The Pound’s movement has been mixed throughout the week. Earlier in the week, it attempted to continue its bullish movement and attempted advance against some major rival currencies.

However, the Euro outlook has been gradually improving throughout the week as well. This meant that the Pound’s recovery attempts were limited, and ultimately the Euro pushed GBP/EUR lower towards the end of the week.

Analysts are predicting that the Eurozone’s vaccination rollout will accelerate considerably through Q2 2021 and that a stronger outlook could even pressure the European Central Bank (ECB) to become more hawkish.

Friday saw the publication of some of the week’s most influential UK and Eurozone ecostats. Notably, the Eurozone’s latest PMI projections from Markit came in largely above forecasts in most key prints, further bolstering demand for the Euro.

According to Chris Williamson, Chief Business Economist at IHS Markit:

‘In a month during which virus containment measures were tightened in the face of further waves of infections, the eurozone economy showed encouraging strength.

Although the service sector continued to be hard hit by lockdown measures, it has returned to growth as companies adjust to life with the virus and prepare for better times ahead.’

The data further boosted optimism that the Eurozone recovery was gaining momentum. It helped the Euro to hold against the Pound, even though Friday’s UK retail and PMI stats came in well above expectations as well.

Pound (GBP) Exchange Rates Vulnerable to Bank of England (BoE) Speculation Next Week

Amid a lack of notable UK data due for publication over the coming week, Pound investors will instead look elsewhere for news that could drive the British currency’s movement.

Britain’s economy is thus far reopening from the coronavirus pandemic as expected, with no shocks to the process so far. As a result, Sterling’s outlook remains fairly optimistic overall.

Amid expectations for the UK economy to keep improving, some analysts speculate that the Bank of England (BoE) could even be pressured to take a more hawkish stance on monetary policy.

If there is a rise in bets for BoE hawkishness, investors awaiting the bank’s May policy decision could buy the Pound further in the coming week.

Essentially, Sterling will be driven by speculation and rival strength in the coming week. The Pound’s likelihood for continued appeal may not be enough if the Euro sees a surge in demand.

Adam Solomon

source:exchangerates.org.uk