The pound to euro forecast rates has once again come under pressure after some positive gains during the last fortnight.
The boost following Chancellor Rishi Sunak’s comments seem to have now disappeared and Sterling exchange rates are once again on the back foot. After two months of the UK economy falling whilst in lockdown the economy has started to pick up again as confirmed by the recent figures for May. The estimate for growth was 5.5% but the rise of only 1.8% month on month has caused the pound to wobble.
A number of sectors, including industrial and construction, did have some positive news. However, services are the main driver for the British economy and they showed only a slight rise, which has dampened any signs of a quicker recovery than expected at the moment.
The lack of a significant rebound highlights that even though shops have reopened, the physical footfall has dramatically reduced with many people still staying at home. The news that many restaurants will be offering discounts during August may entice more people to come out and the hope is that people feel more comfortable getting out and about will hopefully encourage more consumer spending which in theory will help to boost the economy.
As services is such a big part of the UK’s economy, the lockdown has really impacted the growth of the economy and although it’s slowly being phased out there are still major concerns that people are not going out spending.
UK GDP to Influence Pound to Euro Exchange Forecast
According to the latest reports, UK Gross Domestic Product (GDP) data is approximately 25% lower than its peak reached prior to the pandemic. Therefore, when the second quarter UK GDP data is released this is likely to show the sharpest decline on record. The Bank of England (BoE) had predicted a fall of 20% so anything different could cause further movement for pound to euro exchange rates and the pound to euro forecast.
Bank of England governor Andrew Bailey has had a very challenging start to his career after taking over from Mark Carney earlier this year. The BoE have so far added £450bn to the economy in order to stabilise the country and this has allowed the government to introduce their recent plans as outlined by Chancellor Sunak last week.
Following Sunak’s comments, the pound increased by 1% vs the US dollar and made some gains vs the euro as well. The The National Institute Of Economic and Social Research is due to release their latest estimate of UK GDP later today, predictions are for a fall of -18. Anything different could lead to further movements for Sterling so make sure you’re well prepared to move quickly if required.
Tomorrow morning brings with it the latest inflation data for the UK, and inflation is an important indicator as to the health of an economy. This is due out at 09:30 and could also influence the pound to euro exchange rate depending how close to expectation the figure comes out. Typically a fall in inflation puts pressure on a central bank to cut interest rates but with rates already historically low this could increase speculation that further Quantitative Easing may be needed to shore up the UK’s economy.
The GBP to euro forecast is once again looking under pressure as markets eagerly anticipate the news abut both GDP and inflation this week so we could see a lot of movement for the pound v euro exchange rate over the course of this week.
Will the Eurozone Introduce Further Stimulus This Week?
On Thursday the European Central Bank (ECB) will hold their latest monetary policy meeting. Italy posted some fairly positive news with solid data from their manufacturing sector and with inflation data due out on Wednesday any further positive signs could be reflected at Thursday’s ECB meeting. If the overall tone is more confident then this could see further euro strength vs the pound so make sure you pay close attention to the meeting on Thursday lunchtime.
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