UPDATE: The Pound to Euro exchange saw out a choppy Monday session marginally down from the weekly open (-0.14) before trading higher into Tuesday's European session.
Amid a quiet data schedule, Brexit remains the key factor for the GBP. Monday's session saw PM May call off a third meaningful vote amid a lack of support while MPs backed the Letwin amendment to seize control of parliament for a day of indicative votes. In Euroland, the early morning GfK German Consumer Confidence release indicated consumer confidence dipped in March despite forecasts of a marginal improvement.
From the GfK release, "Overall, consumer mood in March 2019 looks somewhat more balanced than in the previous month. Economic expectations are increasing again. However, both income expectations and propensity to buy have decreased somewhat... Whilst consumers are certainly not assuming that Germany will fall into recession this year, they do see a noticeable cooling off of economic activity."
UPDATE: Sterling-Euro resumed its move lower on Monday afternoon after Theresa May postponed the third vote on her Brexit deal due to lack of support.
Addressing the House of Commons this afternoon she told the Gov will oppose an attempt for Parliament to control the process and force a series of indicative votes on possible outcomes for Brexit.
Arlene Foster also told PM DUP still opposed to Brexit deal.
GBP/EUR rallied ahead of the weekend with the cross seeing out a tumultuous week down a shade over half a percent. Into Monday’s session GBP/EUR drifted lower and was last seen trading at €1.1667.
The late week rally for Sterling came in the wake of disappointing Eurozone PMI figures weghing on the single currency while a Brexit reprieve until mid-April allayed fears of a no-deal withdrawal at the end of March.
Monday's schedule is relatively sparse with the latest German Ifo Business Climate index release expected to remain sub 100 with a forecast of 98.7.
Price action will remain contingent on Brexit developments with some analysts predicting GBP to range until clarity emerges over the final outcome.
Head of European fixed income at Franklin Templeton, David Zahn, commented "We’d expect sterling to remain range-bound, with the latest headlines dictating its movement. It should be a similar story for UK government bonds. We’d expect gilts to remain quite well bid until we get more certainty."
British Pound Euro Tipped to Range As Brexit Drives Price Action
Pound Sterling fell as UK unemployment hit a new 44-year low at the start of last week, dipping to 3.9% with the number of those in employment rising to 32.7 million, the highest figure since records began in 1971.
Data also showed that UK wages were also growing at its highest level in a decade, with real pay rising by the fastest rate since August 2016.
Meanwhile, the German ZEW Economic Sentiment survey rose to a higher-than-forecast -3.6 from the previous -13.4, allowing the single currency to claw back some losses.
The pairing continued to rise on Wednesday as the German Producer Price Index (PPI) slipped further than forecast to -0.1%.
Following this, February’s UK Consumer Price Index (CPI) rose to a higher-than-predicted annual rate of 1.9%.
However, CPI missed the Bank of England’s (BoE) 2% inflation target and further data showed that house price rose at their weakest annual pace for five-and-a-half years.
Thursday saw the BoE hold interest rates steady at 0.75%, with the minutes from the Monetary Policy Committee highlighting the bank’s next move depends largely on Brexit.
Brexit pessimism largely overshadowed this, as the pairing slumped towards the end of the week.
The GBP/EUR exchange rate began to rise on Thursday evening as the European Union leaders’ summit resulted in an unconditional two-week extension of Brexit to 12 April.
Meanwhile, Friday morning was a disappointing day for data releases from the Eurozone as the flash German manufacturing PMI slipped to 79-month low.
Data showed that the index has now fallen in 14 out of the past 15 months from the record high of 63.3 at the end of 2017.
Will Sterling (GBP) Exchange Rates Rise on a Further Article 50 Extension?
It is likely that Brexit will be one of the main catalysts for the Pound Euro (GBP/EUR) exchange rate as Friday marks the original departure date for the UK.
This week will also see Prime Minister Theresa May attempt to get her deal through Parliament, and if successful the EU leaders will grant the UK an extension of Article 50 to 22 May.
It is likely that the Pound (GBP) will rise against the Euro (EUR) if May’s withdrawal agreement is passed.
The UK’s Q4 2018 GDP figure is due to be released at end of this week’s session which is likely to cause movement in the pairing.
If GDP rises by 0.2% in Q4 it is likely Sterling could make tentative gains as it signals the economy continued to grow despite Brexit anxieties.
Could a Dovish Draghi Weigh on the Euro (EUR) Exchange Rates?
At the start of next week’s session, March’s German IFO Business Climate, Expectations and Current Assessment indexes are due for release which may cause the Euro (EUR) rise against Sterling (GBP).
As both business climate and expectations are forecast to rise, it could buoy the Euro and overshadow a dip in March’s current assessment.
On Wednesday, President of the European Central Bank (ECB) Mario Draghi is due to give a speech at the ‘ECB and its watchers’ conference’.
If Draghi’s outlook for the Eurozone continues to be dovish, and Draghi focuses on the recent slump in German manufacturing the Euro could plummet.
Also likely to cause the Euro exchange rates to slump further is the release of Germany’s monthly retail sales figure which are forecast to contract by -0.5%.
GBP/EUR Forecast
The Pound-to-Euro rate is tipped to remain in the €1.149-1.176 range for now according to analysts at Danske Bank in a brief to clients recently.
However, they forecast sterling to appreciate towards €1.162 in one month, €1.2048 in three months and €1.2195 in six months "on the back of the ECB's dovish policy shift."
The currency analysts "build our forecast on the baseline scenario that a deal will pass and that this could happen before the summer holiday, paving the way for a decline in EUR/GBP."
Latest Exchange Rates 25.03.2019
- GBP/AUD $1.86106 (-0.21%)
- GBP/CAD $1.76995 (-0.17%)
- GBP/CHF CHF1.31151 (-0.09%)
- GBP/CNY ¥8.85650 (-0.16%)
- GBP/CZK Kč30.04466 (-0.23%)
- GBP/EUR €1.16698 (-0.18%)
- GBP/HKD $10.35224 (-0.1%)
- GBP/ILS ₪4.78440 (+0.08%)
- GBP/JPY ¥145.20059 (-0.13%)
- GBP/MXN $25.24277 (-0.03%)
- GBP/NOK kr11.28737 (-0.17%)
- GBP/NZD $1.91668 (-0.19%)
- GBP/PLN zł5.01128 (-0.29%)
- GBP/SEK kr12.21131 (-0.24%)
- GBP/SGD $1.78290 (-0.21%)
- GBP/TRY ₤7.46785 (-0.64%)
- GBP/USD $1.31907 (-0.11%)
- GBP/ZAR R19.10567 (-0.17%)