– Written by
Ben Hughes
STORY LINK British Pound to Euro Forecast: GBP in Tight Range, but Risks Build
The Pound to Euro exchange rate (GBP/EUR) has remained resilient, but investors remain cautious about extending gains while geopolitical risks remain elevated.
GBP/EUR Forecasts: Holding Firm
The Pound to Euro (GBP/EUR) exchange rate has again resisted any test of the 1.1500 area and is trading around 1.1535 despite a fresh dip in global risk appetite.
GBP/EUR will need to break 1.1500-1.1570 range to trigger a decisive move
UK data releases and geo-political developments will be watched closely this week.
The on-going crisis surrounding Greenland and the threat of additional US tariffs on Europe will have important implications for the Pound and Euro.
According to Credit Agricole; “Geopolitical risks could remain an important EUR driver with
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the World Economic Forum in Davos likely to become an important focal point.”
The latest COT data, released by the CFTC, recorded a further decline in short, non-commercial Pound positions to 25,300 contracts from 30,500 the previous week.
ING commented; “We think this week’s data set – November jobs data and December CPI – could prove slightly bullish for sterling and extend a short squeeze which has been extending since late November.”
It did, however, add; “We are cognisant that sterling tends to underperform in major risk-off episodes; clearly, there are many moving parts at play here.”
Credit Agricole is less positive; “Our analysis of FX positioning suggests that the GBP short squeeze may have largely run its course. This could leave the currency vulnerable to any data disappointments.”
As far as data is concerned, the latest UK labour-market data will be released on Tuesday.
Consensus forecasts are for the unemployment rate to tick lower to 5.0%in the three months to November from the 4-year high of 5.1% registered last month.
The latest data on employment and vacancies will also be watched closely. As far as earnings are concerned, the annual increase is forecast to slow to 4.6% from 4.7%.
Also on Tuesday, Bank of England (BoE) Governor Bailey and Deputy Governor Ramsden are due to testify on the Financial Stability Report to the Treasury Select Committee.
The latest inflation data is due on Wednesday with the headline and core rates expected to edge higher to 3.3% from 3.2% previously.
The latest UK and Euro-Zone business confidence data is also scheduled for release on Friday with expectations that there will be slight improvements in both areas.
The data and BoE comments will have an impact on interest rate expectations and the Pound Sterling.
Weak data would reinforce expectations of further Bank of England rate cuts while markets expect no change from the ECB.
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TAGS: Pound Euro Forecasts
