Pound Sterling to Euro (GBP/EUR) Exchange Rate Advances – Could UK Growth Improve in 2020?

Pound to Euro Exchange Rate Sustains Gains despite Carney’s Caution

The Pound Sterling to Euro (GBP/EUR) exchange rate tumbled yesterday, but at the end of the week is advancing again. The pair is firming a week of gains amid a lack of fresh news due for publication. Markets are speculating a more optimistic 2020 for Britain’s economy.

Since opening this week at the interbank level of 1.17, GBP/EUR has trended higher.

While GBP/EUR has been unable to hold weekly highs of 1.18, the pair has avoided a fall back to the week’s opening levels.

At the time of writing on Friday, GBP/EUR is trending around half a cent above the week’s opening levels and is on track to end the week higher.

Markets are now looking ahead to next week’s key UK and Eurozone data, for a better idea of if these economies will recover in 2020.

Pound (GBP) Exchange Rates Recover amid Hopes for 2020 Economic Resilience

Yesterday, Bank of England (BoE) Governor Mark Carney knocked the Pound (GBP). It came as his comments suggested that the bank was prepared to loosen UK monetary policy further, if Britain’s economic outlook worsened.

However, while this briefly caused BoE interest rate cut bets to rise, recent UK data has been a little more optimistic.

Signs of resilience and strength in data, means that the BoE may not find the need to loosen monetary policy if data continues to improve.

In fact, analysts believe Britain’s economy and the Pound will strengthen this year amid hopes for a relatively smooth outcome to Brexit. According to Jordan Rochester, Strategist from Nomura FX:

‘The removal of near-term hard Brexit risks, the widely expected fiscal expansion, US-China trade tensions lower and a global recovery in economic data suggest the Bank of England will stay on hold,’

Euro (EUR) Exchange Rates Struggle to Hold Ground as Rival Currencies Advance

This week’s Eurozone data has been mixed. It has ultimately not been enough to keep the Euro (EUR) strong.

This morning’s French industrial production results beat forecasts and came in at 0.3%. This followed yesterday’s better than expected German industrial production, but some other recent stats were underwhelming.

For example, yesterday’s German exports stats and Wednesday’s German factory orders figures fell short.

Due to a lack of solid support from Eurozone data, the Euro was largely driven by strength in rivals. With the Pound (GBP) registering advances this week and the Euro’s biggest rival the US Dollar (USD) rebounding, demand for the shared currency has been limited.

Pound to Euro (GBP/EUR) Exchange Rate Investors Turn to Economic Outlooks

While Brexit uncertainty has been part of the Pound’s (GBP) mixed movement in recent sessions, the currency may find notable support if upcoming UK data is impressive.

If data beats market expectations, it will boost hopes that Britain’s economy is resilient amid Brexit uncertainties. This will soften Bank of England (BoE) interest rate cut speculation.

Next week will see the publication of many notable UK ecostats. The week starts out with trade, production and growth results on Monday.

This will be followed by inflation stats on Wednesday, and retail sales results on Friday.

Euro (EUR) investors will of course remain focused on upcoming Eurozone data. German growth and Eurozone trade data is due on Wednesday, German inflation on Thursday, and Eurozone inflation on Friday.

If UK and Eurozone inflation results show signs of improvement, central bank easing speculation is likely to be doused.

Strength in the Euro’s biggest rival, the US Dollar (USD), could also influence the Pound to Euro (GBP/EUR) exchange rate next week.

Josh Jeffery

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