Published: Thu, February 15, 2018
Business | By Tara Barton

The GBP/EUR Exchange Rate Climbs as UK Government Appears to be Stabilising

The GBP/EUR Exchange Rate Climbs as UK Government Appears to be Stabilising

Looking ahead to the rest of the day, we do not have any major economic data from the USA or the United Kingdom and so we can expect some more consolidation from the pair below the 1.40 region.

Danske's forecast for EUR/GBP is at 0.86 in six months and 0.84 in twelve months.

"Unfortunately for Mark Carney, his recent reasoning that inflation could rise over the short term due to energy prices appears to be undermined, with the core reading showing that United Kingdom inflation is on the rise irrespective of energy prices", said Joshua Mahony, market analyst at IG.

Sterling slipped towards $1.38 as the dollar strengthened after data showed U.S. consumer prices rose more than expected in January, strengthening bets the Federal Reserve would need to raise interest rates faster. The biggest single factor undermining the Dollar this year has been the improvement in the global economy - a more balanced economic recovery drags investment away from the USA and towards more interesting markets'.

GBP/EUR Exchange Rate Forecast: Euro Liable to Extend Lead on Widening Bloc Trade SurplusThe Euro found support on Wednesday on news that the bloc's yearly growth rate printed at a 10-year high of 2.5% in 2017 - and this could extend into Thursday as markets react to the Eurozone's trade balance figures.

In respect to the United Kingdom, lacking much in the form of pertinent domestic data releases markets will instead focus on any Brexit-related soundbites, with demonstrable progress liable to bolster Sterling and an ongoing deadlock liable to put GBP/EUR under fresh pressure.

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Meanwhile the Euro could find some strength tomorrow as analysts predict that German wholesale prices will have risen in January.

With equity markets recovering from last week's slide on Monday, however, the return of risk appetite encouraged investors to sell dollars and buy back into riskier currencies. As a result, AUD/GBP fluctuated on Tuesday rather than continuing its recovery.

The pound skidded on Friday after the EU's chief Brexit negotiator Michel Barnier warned a transition deal was far from assured. This headline rate was in line with the Bank of England's inflation report last week but stronger than the consensus forecast of 2.9%.

Data published by France's statistics office, INSEE, revealed that unemployment fell from 9.6% to 8.9% in the fourth quarter, its lowest levels since 2009 and beating expectations that unemployment would remain unchanged.

United Kingdom retail sales data from January will be published on Friday morning. Any news from UK or EU officials about the tone that UK-EU transition and trade talks could take may have an impact on the Pound outlook. If concerns remain that stocks could fall again, investors may hesitate to buy risky currencies like the Australian Dollar.

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