– GBPEUR exchange rate tipped to test highs of 1.19 “in coming days”.
– Pound Sterling tests best levels vs. Euro of 2021 and in over a year.
– GBP/USD direction will be largely about EUR/USD say ING analysts.
GBP/EUR Exchange Rate Tests New Yearly Best Towards the End of Last Week
Strength in Eurozone data has not done enough to improve the Euro’s fortunes, as the British Pound to Euro (GBP/EUR) exchange rate continues to trend higher. Optimism around Britain’s coronavirus recovery outlook and strong UK data are keeping the Pound outlook broadly bullish. Plus, as next week’s UK and Eurozone economic calendars are expected to be a little quieter, investors may have little reason to shift direction on the pair without surprising developments in the coronavirus pandemic.
After opening last week at the level of 1.1715, GBP/EUR saw mixed movement but was ultimately trending higher towards the end of the week.
The Euro’s attempts to push Sterling back from highs were limited, and Thursday saw GBP/EUR strike yet another yearly high. Thursday’s level of 1.1758 was the best level for GBP/EUR since early 2020, though GBP/EUR trended a little lower around the region of 1.1740 after that.
While the Pound’s recent bullishness has been softening a little over the past few weeks, the British currency continues to see strong support against major rivals. In particular, it is appealing against the relatively weak Euro.
News that Britain’s economic reopening was continuing as planned supported the Pound last week, as did continued bets that the UK economic would be one of the first major economies to recover from the coronavirus pandemic.
This was only further supported by the week’s UK data, which generally beat expectations. While the data had little impact on the Pound’s outlook, it kept markets optimistic and the Pound buoyed.
According to Jane Foley, Senior FX Strategist at Rabobank:
‘While the GBP may continue to struggle vs. the USD in the current environment, we expect that it will remain well supported vs. low yielding G10 currencies such as the CHF, JPY and the EUR,’
The Euro was sensitive to the strength of the Pound, as concerns about the Eurozone’s coronavirus pandemic situation worsened.
Despite stronger than expected Eurozone data, including impressive March PMIs, investors were more anxious that France was headed for a third national lockdown.
European Central Bank (ECB) Policymaker Jens Weidmann expressed concern about how the pandemic could negatively influence the Eurozone outlook:
‘Due to the currently strong increase in the number of infections, it could take longer for the protective measures to be relaxed than assumed in the March forecast,
In this case, the forecast of the GDP growth rate for the euro area in 2021 might no longer be sustainable.’
Pound (GBP) Exchange Rates Could Keep Climbing on UK Optimism
Next week’s UK economic calendar will be fairly quiet.
There are some key UK figures due for publication, including Markit’s final March services and composite PMI results from Markit on Wednesday.
UK car sales stats are expected on Tuesday and construction PMI data is due on Thursday. Besides that though, there is little in the way of major UK developments expected.
Markets will continue to anticipate Britain’s economic reopening, which will continue with more stores reopening later this month.
As a result though, a surprising downturn in the UK coronavirus situation could have a notably negative impact on the Pound.
If there are surges of infections or signs that lockdown easing could be delayed, this is the most likely way the Pound will be hit lower in the coming week or so.
Failing that, Sterling is simply likely to remain highly appealing, especially against a weak Euro.
GBP to EUR Near-Term Forecast: Euro May Lack Drive Without Improving Coronavirus Outlook
Amid another coronavirus lockdown in France, and continued signs that the Eurozone economy is recovering more slowly than the UK or US economies, investors will have little reason to buy the Euro over the coming week or so.
Upcoming Eurozone data could be somewhat influential. Tuesday will see the publication of the Eurozone’s February unemployment rate report, followed on Wednesday by the final Marc manufacturing PMI results.
Some German data, including factory orders and trade balance stats, could also be influential towards the end of the week.
However, unless these stats have a big impact on the Eurozone outlook, the Euro will likely remain generally unappealing. This is due to the Eurozone’s coronavirus recovery outlook being further back than those of other major economies, including the UK and US.
Overall, unless there are surprises in the UK or Eurozone coronavirus outlooks, the Pound to Euro (GBP/EUR) exchange rate is likely to remain fairly strong for now.