GBP/EUR Forecast – Positive Run for Sterling Cools During Friday’s Trading (Matthew Vassallo)

GBP/EUR rates have leveled out during Friday’s trading, following a busy week of economic data for both the UK & the Eurozone.

The pair is currently trading around 1.1450, with the Pound hitting a high of 1.1534 yesterday before quickly retracting.

Sterling had made impressive gains during Thursday’s trading, with the Pound gaining further value after a positive start to the week.

The catalyst for this improvement was reports earlier in the week that the UK & EU have all but agreed on the terms for a Brexit transitional deal.

This helped to drive investor confidence higher following weeks of stagnation and any progress was always likely to help facilitate a rise in the Pound’s value. It also helped to alleviate many of the concerns that the UK was going to be left in a state of economic limbo, following our separation and as such investor confidence surged and Sterling’s value has mirrored this.

This positive trend was further accentuated on Wednesday following the latest UK Unemployment figures, which came out better than expected at 4.3%, with average earnings also rising by 2.8%. Due to average wages now almost being in line with inflation, the markets started to factor in a prospective interest rate hike, which according to many analysts opinions would be in line with the figures released.

Therefore, yesterday’s Bank of England (BoE) interest rate decision and subsequent monetary policy statement took on even greater significance and the markets reacted accordingly. Despite the central bank keeping rates on hold at 0.5%, two members of the BoE voted in favour of a rate hike this month.

Despite the vote being 7-2 against, it is now far more likely that the central bank will raise rates over the coming months, especially when you consider BoE governor Mark Carney’s comments regarding the subject, which were bullish based on an improved economic performance by the UK.

The run of good data this week also included UK Retail Sales figures, which were released yesterday morning. These came out MoM at 0.8%, which was well above the markets predicted figure of 0.4%. There was also an annual increase to 1.5%, so overall it has certainly been a positive week for UK economic data and the Pound has found support across the board due to this.

However, a word of caution must be heeded to those clients holding Sterling, as this is not the first time the pound has threatened to make significant inroads against the other major currencies. Despite the fact there may be more substance to the recent increase in value, there are still many unanswered question, in terms of how the UK economy will be shaped and perform when it goes it alone.

At a first glance, it seems as though the UK have had to give up a lot of ground to the EU in order to move talks forward, details of which will become clearer over the coming weeks. If the UK is under heavy restrictions during the transitional period, then this could restrict economic growth and opportunities for UK business’s and this in turn would likely heap pressure back on the Pound.

If you have an upcoming GBP or EUR currency transfer to make, you can contact me directly on 01494 787 478. We can help guide you through this turbulent market and as a company we have over eighteen years’ experience, in helping our clients achieve the very best exchange rates on any given market.

Our award winning rates can be accessed very easily over the phone and I can keep you posted with key market developments ahead of any prospective exchange you need to make.

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