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Pound Euro Exchange Rate Falters as BoE Lowers UK Growth Forecasts

Last week’s high: €1.1453

Last week’s low: €1.1290

GBP/EUR Exchange Rate under Pressure after Dovish BoE Meeting

The announcement that the US was withdrawing from the Iran nuclear deal has prompted a bout of losses for the Euro.

This move could have major ramifications for the Eurozone economy as the re-imposition of US sanctions on Iran threatens to disrupt a number of European investments.

The news also set the US Dollar on a fresh bullish trend, to the detriment of EUR exchange rates.

Reaction to the European Central Bank’s (ECB) latest Economic Bulletin proved rather limited, meanwhile, with the release offering no fresh insights into the policy outlook.

As ECB policymakers look set to maintain a relatively dovish stance in the months ahead the appeal of the Euro remained limited.

The GBP/EUR exchange rate came under significant pressure on Thursday, however, as the Bank of England (BoE) opted to leave interest rates on hold once again.

While the move was widely expected this still left the Pound on a weaker footing, especially as the BoE also downgraded its growth forecasts in the quarterly Inflation Report.

With confidence in the UK economic outlook dented, the mood towards Sterling soured markedly, weighing heavily on the GBP/EUR exchange rate.

Euro Outlook: Single Currency Vulnerable to Weaker Eurozone Economic Growth

Confidence in the Euro could weaken further over the coming days with the release of the first quarter German and Eurozone gross domestic product data.

Forecasts point towards a loss of momentum in both the German economy and the wider Eurozone, with growth thought to have eased in the first three months of 2018.

This could weigh heavily on EUR exchange rates, as weaker growth would give the ECB further incentive to maintain its accommodative monetary policy for longer.

However, if the GDP figures beats expectations this may leave the GBP/EUR exchange rate on a softer footing this week.

A boost could be in store for the Pound, though, if the latest UK average weekly earnings figures show an uptick in wage growth.

 

Key Events

15th May

07:00   German Gross Domestic Product

09:30   UK Average Weekly Earnings

10:00   Eurozone Gross Domestic Product

16th May

10:00   Eurozone Consumer Price Index

18th May

10:00   Eurozone Trade Balance

 

 

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To keep up to date with the Euro, visit the Euro blog in our Currency News section.

 

 

Alastair Archbold

Currency Trader

aja@fcgworld.co.uk

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