Pound To Euro Forecast: BEST GBP/EUR Exchange Rates Ahead?

Foreign exchange markets discover the British pound to euro rate edging yet further from best levels as UK housing looks softer and fresh Brexit anxiety in markets. 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

GBP's appeal continued to soften on Monday morning, slumping in response to a sharp dip in the BBA Loans for House Purchase measure.

With mortgage approvals having fallen further than forecast in August the domestic housing market appeared less robust, something that bodes ill for the wider UK economy.

Additional pressure comes in the form of renewed Article 50 news, something Saxobank's analysts suggest is weighing on GBP/USD:

"Further downside pressure is seen in GBPUSD. Prime minister Teresa May commenting on the Article 50 stays in focus which keeps pushing cable to the lows of Friday."

Latest Pound/Euro Exchange Rates

The latest foreign exchange rate market movements saw GBP/EUR making multiple ventures above last week’s opening levels of 1.1653, even hitting a weekly best of 1.1713.

However, by the end of the week the pair had fallen to a fresh monthly low of 1.1573.

This saw GBP/EUR exchange rate draw even closer to the worst post-Referendum levels.

British Pound (GBP) Slips Against Euro (EUR) as Brexit Concerns Take Hold

Sterling had a tough time of it recently, trending limply for the first half of the week, seeing a brief relief rally on Thursday, and finally plummeting to a new monthly low on Friday morning.

For most of the week, the currency simply lacked the supportive data needed to be appealing to investors, which meant a lot of corrective trading and fluctuations.

On Thursday, Sterling saw a more definite advance thanks to hawkish comments made by Bank of England (BoE) policymaker Kristin Forbes – who stated in a speech that the effects of the Brexit on the economy had thus far been little and that its future effects were still unknown.

The key takeaway from her speech was that she did not yet believe the BoE had a case to introduce further monetary easing.

However, Sterling quickly gave up these gains and plummeted on Friday as investors reacted bearishly to fresh Brexit speculation. UK foreign secretary Boris Johnson stated that the UK government would ‘probably’ activate Article 50 and begin the formal Brexit process in early 2017, which caused anxious investors to sell off GBP.

The Euro, on the other hand, saw mixed movement but generally held its ground last week. The shared currency was boosted considerably by a US Dollar selloff due to Fed disappointment, and trended sturdily on Friday as the Eurozone’s preliminary September Manufacturing PMIs beat expectations.

Pound Sterling (GBP) Exchange Rates UK House and Growth Data in Week Ahead

Next week’s British economic calendar will be a little more eventful than last week’s, with relatively influential house data being published in the first half of the week and final Q2 growth stats coming in on Friday.

BBA will publish its August house loans report on Monday, Nationwide will publish its September house prices report on Wednesday, and British mortgage approval stats will be released on Thursday. Thursday also sees the publication of August’s consumer credit figures.

Next Friday’s session may be the most vital for Pound traders however, as GfK will publish its September consumer confidence print as well as the day’s aforementioned Q2 Gross Domestic Product (GDP) report.

September figures will be ones to watch, as if these beat expectations it could increase hopes of solid economic performance for the month. Final Q2 growth scores will also be heavily influential if they happen to score above or below preliminary results.

Euro (EUR) Exchange Rates to Face Key German Data Due

Following last week’s mixed German PMIs (in which Manufacturing impressed but Services disappointed) investors will be hoping that the coming week’s data gives a more solid indication of how the Eurozone’s biggest economy has fared in September.

IFO will publish its September business sentiment figures on Monday, followed by August’s German retail sales scores on Tuesday. Investors will also get an idea of German consumer confidence going forward from GfK’s October consumer confidence report, due on Wednesday.

As with the UK, the week’s most vital datasets will be published later in the week. Thursday’s session will see the publication of September’s German unemployment scores and preliminary inflation stats.

Lastly, the Eurozone’s August unemployment rate and preliminary September inflation scores will be published on Friday, rounding off a potentially very influential week for Eurozone traders.

GBP/EUR Exchange Rate Could See Losses as Brexit Concerns Knock Sterling Lower

The Pound to Euro (GBP/EUR) exchange rate could be situated to fall even further in the coming week depending on the mood of Sterling investors.

UK markets were spooked last week as the reality of the Brexit vote set in once again, as governments began to hint that it may have to give up on single market access and businesses began to set their sights on EU cities besides London.

With Friday’s comments from Boris Johnson reminding markets that the Brexit process would likely not be delayed much longer, this anxiety could set the tone for Pound trade in the coming week.

However, if optimistic comments towards the Brexit process are made by top officials or bankers, it could give Sterling a little support. September data could also increase hopes of continued economic resilience from Britain.

Key GBP and EUR Related Economic / Forex Events This Week

This week's euro-focused events include the German Ifo Business Climate source, ECB President Draghi Speaks source, German Import Prices source, M3 Money Supply, Private Loans, GfK German Consumer Climate, M4 Money Supply, Mortgage Approvals, Italian 10-y Bond Auction source, German Retail Sales, French Consumer Spending, French Prelim CPI source, CPI Flash Estimate source.

This week's sterling-focused events include the BBA Mortgage Approvals source, CBI Realized Sales source, MPC Member Shafik Speaks source, Net Lending to Individuals, Nationwide HPI, UK Current Account source, UK Final GDP.

Will GBP/EUR, GBP/USD Exchange Rates Find a Bottom on Invoking Article 50?

According to John Hardy at Saxobank, foreign exchange markets may have oversold the pound sterling:

"Sterling was generally weaker this week through all of the back-and-forth elsewhere and appears to be nearing key trigger areas both in EURGBP and against the USD as the recent mention of an Article 50 invocation in early 2017 seemed to be the trigger for renewed sterling selling. If the pound closes the week on a weak note the market may drive the currency to new lows in the major GBP pairs as confidence may remain low as long as the unknown of what a Brexit actually looks like will loom for a long time to come. Ironically the low point may come at the point of maximum uncertainty when Article 50 is finally actually invoked and the market is too heavily positioned and realises that this isn’t the end of the world."

Lloyds recently summarised the sterling-euro exchange rate outlook in three key points:

"GBP/EUR recently rose to near 1.20, having fallen to new post-referendum lows below 1.15 in mid-August."

"Central bank policy easing, from the Bank of England and European Central Bank, is likely to be a key driver of the currency pair."

"We forecast GBP/EUR at 1.18 by end-2016 and 1.27 by end-2017."