British Pound To Euro Exchange Rate Forecast: FX Markets Buy Sterling As Theresa May Set To Be New PM

Published: 20 Oct 2017 21:24 Currency Markets Ecomomy News Forex

Pound to Euro exchange rate forecast

Last week's foreign exchange investors saw sterling crash lower, with the British pound to euro conversion rate (GBP/EUR) reaching two-and-a-half year lows. 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.

  1. Pound to euro exchange rate today: +0.1pct at 1.17313.
  2. Euro to pound sterling exchange rate today: 0.85242.
  3. Pound to dollar exchange rate today: +0.21pct at 1.29701.
  4. Theresa May is set to become the UK's next prime minister after Andrea Leadsom pulls out.
  5. Bank of England are forecast to cut interest rate by 0.25pct this week, sterling set to tumble?

Sterling rallied against both the euro and the US dollar today after Andrea Leadsom pulled out of the leadership battle.

Foreign exchange markets clearly appreciated Theresa May as the new PM, with GBP/EUR boosted 0.40 per cent and the US dollar, albeit still at 31 year lows, gained 0.6 per cent.

Foreign exchange markets saw significant volatility in sterling last week, with the British pound plunging from best conversion levels of 1.1937 to lows of 1.1647 against the euro.

The week started off on a low note for GBP/EUR, with the UK’s construction PMI for June showing a slip into the contraction range and the services PMI faring little better.

One of the greatest blows came on Tuesday, when Bank of England (BoE) Governor Mark Carney issued cautious statements about the UK’s economic future; this had the ultimate effect of lowering the Pound’s appeal considerably.

Pound to Euro exchange rate chart
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Latest Pound/Euro Exchange Rates

On Friday the Pound to British Pound exchange rate (GBP/GBP) converts at 1

The pound conversion rate (against pound) is quoted at 1 GBP/GBP.

The live inter-bank GBP-USD spot rate is quoted as 1.262 today.

The pound conversion rate (against canadian dollar) is quoted at 1.71 CAD/GBP.

Today finds the pound to swiss franc spot exchange rate priced at 1.139.

The live inter-bank GBP-AUD spot rate is quoted as 1.939 today.

Please note: the FX rates above, updated 29th Mar 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) Volatility vs Euro (EUR) on This Week's BoE Interest Rate Decision

The coming week will only bring two UK economic announcements, although both promise to have a major impact over the pound to euro exchange rate’s appeal towards the end of the week.

Thursday will see the BoE announce its interest rate decision for July, the first post-‘Brexit’ one of its kind.

Current predictions are dovish, with a rate cut from 0.50% to 0% on the cards.

As reported by the Guardian:
Mitul Patel, the head of interest rates at Henderson Global Investors, said: 'The market now expects interest rates to fall to close to 0%, and while Carney has previously stated a dislike of negative interest rates, nothing can be taken off the table.'
"Some say the committee will go for a smaller 25 basis point cut, leaving itself the option to cut again in August when it also publishes new economic forecasts and will have a better sense of how the EU referendum result has affected the UK."

Closing off the week after this potentially historic decision will be the May construction output result on Friday, which is forecast to show an annual shift from -3.7% to -0.68%.

euro to pound sterling exchange rate chart

Euro (EUR) Exchange Rates Mixed Last Week on Fluctuating Eurozone Data Releases

The single currency had a rough time last week, alternately being boosted and sent tumbling by mass releases of Eurozone domestic data.

While Tuesday’s composite PMIs were broadly negative, retail sales results that came on the same day were conversely positive. Any optimism was deflated on Wednesday, however, when the Eurozone-wide retail PMI fell from 50.6 to 48.5.

Closing off the week, Germany’s trade surplus fell in May, while Moody’s issued a concerning statement that the ‘Brexit’ decision could derail the EU as a whole.

German Inflation due this Week as well as Eurozone Production and Trade Stats

The coming week will see no let-up in the stream of Eurozone domestic data results, with individual nations and the currency bloc in its entirety posting data across the five weekdays.

Tuesday will bring a glut of German ecostats, consisting of the June wholesale prices and inflation rate results on the month and the year; forecasts have been mixed on the whole.

Friday will be another day to watch out for, as the Eurozone-wide trade balance result and inflation rate stats for June will come it. The current trade surplus is forecast to be reduced, while annual finalised inflation rate has a rise from -0.1% to 0.1% in store.

Moody’s Dampened the Mood Last Week with Warnings of Irreparable Damage to EU

Although the Eurozone and the EU have not immediately disintegrated in the wake of the EU Referendum decision, ratings agency Moody’s has recently issued a concerning statement on how the multinational union may face significant difficulties in the future.

In a statement last week, the concerns were voiced as:

‘In the long run, the potential strengthening of nationalistic and protectionist movements could have a detrimental effect on the EU, even threatening its existence’.

Key GBP and EUR Related Economic / Forex Events This Week

This week's euro-focused events in include the Italian Industrial Production (source), Eurogroup Meetings (source), German Final CPI (source), German WP, French Final CPI (source), Industrial Production (source), German 10-y Bond Auction (source), Italian Trade Balance, Final CPI and the Trade Balance.

Sterling-related economic releases include the BRC Retail Sales Monitor (source), FPC Meeting Minutes (source), Inflation Report Hearings (source), BOE Quarterly Bulletin, BOE Credit Conditions Survey, RICS House Price Balance (source), MPC Official Bank Rate Votes, Monetary Policy Summary, Official Bank Rate, Asset Purchase Facility, MPC Asset Purchase Facility Votes and the Construction Output and finally BOE Gov Carney Speaks.

Key Post-Brexit Outlook According to Top Financial Institutions

Lloyds deliver their most recent research for the euro to pound exchange rate in the near to medium-term:

"EURGBP remains in proximity to its range highs, and conclusive signs that a medium term top is in place are still lacking."

"A break of 1.28 in GBPUSD and 0.8650/0.8700 in EURGBP would trigger further GBP weakness."

"For now though, intra-day studies are still unwinding from over bought suggesting a broader correction is still possible – initially towards 0.8450 and subsequently 0.8390/50."

"Should these areas be breached, it may provide the impetus for a deeper test of support in the 0.8150/0.8050, which would add conviction to the view that a broader correction is underway."

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