Nobody can predict the movements in the FX market with 100% accuracy. However, as experts in managing foreign exchange, Equals Money can help your business mitigate risk when dealing with transactions across multiple currencies.
At Equals Money, it’s our mission to make money movement as simple as possible. We want to help your business move forward in 2023 despite any potential disruptions, such as market volatility or adverse currency fluctuations.
One of the ways we help your business is by looking closer at the currency pairs you care about by analysing market data that’s historically had an impact on the pair and providing insight to forecast what could come next.
Read on to take a look at our current outlook for the sterling-euro currency pair.
If you'd like to stay up to date on market news, you can sign up for our daily market report email or follow us on LinkedIn.
GBPEUR continues to be supported
Following the hawkish rate hike by the BoE (Bank of England), sterling initially dropped with concerns of negative implications on the economy. However, on Friday the lacklustre PMI numbers from Europe caused the EUR to weaken, causing demand for GBP at “Support 1”.
Interest rate differential seems likely to continue GBP for now, keeping “Resistance 1” in play.
It’s a quiet week from the UK, with a final reading of growth for the first quarter in focus. We have several BoE members speaking this week also, with their comments on future policy to be the focus. News over the weekend suggested that the government may also get involved in taming inflation, so we will wait to see potential developments, which may change rate expectations.
We’ll have several ECB (European Central Bank) speakers this week, with the only notable data points being June’s inflation numbers from across Europe. Signs of prices dropping will likely weaken the EUR.
Data from Europe continues to suggest the economy is already slowing down, heightening the possibility of a change in stance from the ECB. In the short term, markets will likely follow the data points and unless the data suggests a slowdown in the UK economy, the GBPEUR pair will likely be supported.
GBPEUR continues to drive higher
Interest rate differentials continue to be the driver on the GBPEUR pair, with markets favouring higher interest rate expectations from the BoE (Bank of England) over the ECB (European Central Bank).
Last week, ECB talk was perceived as hawkish which tried to keep a lid on the pair, but Friday saw a breakout above prior resistance now acting as ”Support 1”. For a push to “Resistance 1”, we will need to see momentum carry on over the coming days.
This week, big focus will be on GBP and whether Wednesday’s inflation numbers and BoE meeting on Thursday will keep markets pricing in higher interest rates for longer. A combination of inflation falling faster than expected and a dovish outlook by the BoE would be needed to stop the gains for GBP. Otherwise, we could see rates heading towards “Resistance 1”.
We’ll have several ECB speakers this week, with the only notable data point being the services and manufacturing PMI numbers on Friday.
GBPEUR pushes to 6-month highs
GBP continued its move higher versus the EUR with interest rate differentials and inflation in Europe easing more than expected being one of the main factors behind the move.
The big test on the pair will be at “Resistance 1”, where since September 2022 we have seen prices rejected off this level six times due to increased demand to buy EUR. Should the buyers not emerge, then a sustained move through this level should see August 2022 highs come into focus.
This week, services and construction PMI numbers are the only major data points from the UK and we have several BoE (Bank of England) members speaking as well. Market pricing for additional rate hikes from the BoE remains aggressive, stoking up demand for GBP. Anything that counters this pricing will be negative for the currency.
The negative move on the EUR over May does seem excessive, so there is a good chance that markets see this weakness as a good opportunity to buy the common currency as a value proposition, but data will need to support this.
So this week we look at services and construction PMI numbers, as well as revised numbers on growth for the 1st quarter of this year. Inflation is dropping, but have aggressive rate hikes slowed growth?
GBPEUR towards Nov/ Dec 22 highs?
Last week the pair was very range bound, fluctuating between the highs on the 11th May and “Support 1”. The fact that this support level remained intact suggests appetite to drive GBPEUR higher towards the highs seen in November/ December.
Manufacturing PMI numbers are the only major data point from the UK this week and we have several BoE (Bank of England) members speaking as well. Market pricing for additional rate hikes from the BoE remains pretty aggressive, stoking up demand for GBP. Anything that counters this pricing will be negative for the currency.
This week, inflation numbers from the eurozone will be the key data point. Whilst market pricing for additional rate hikes by the ECB (European Central Bank) remains around 0.5%, demand for the EUR has dropped suggesting perhaps markets have peaked in their expectations for these hikes
Inflation in May is expected to show signs of easing, which would add to the continued selling of EUR. However, any uptick in inflation numbers should expect a sharp rebound on the EUR.
GBPEUR still supported
The GBPEUR pair was very range-bound last week, fluctuating between the highs on the 11th May and “Support 1”. The fact that this support level remained intact suggests appetite to drive GBPEUR higher.
This week, the key data will be April’s inflation numbers on Wednesday. Currently, markets are expecting year on year inflation to drop from 10.1% to 8.2% with the core inflation number expected to fall to 6.1%. Lower numbers than this and we could easily see markets ease rate hike expectations for this year, which would be negative for sterling. On Tuesday, we have May’s PMI numbers and finishing the week we have April’s retail sales numbers.
With the euro on the back foot of late, numbers this week will need to be vastly better than expected to support the single bloc currency. On Tuesday, we start with PMI numbers, IFO sentiment figures from Germany on Wednesday, and first quarter growth data from Germany on Thursday.
So, as long as the GBPEUR pair remains above “Support 1”, then “Resistance 1” could well be tested, which is 1.36% higher than current levels.
GBPEUR breaks 2023 Resistance
Last week, GBP broke out of its 2023 resistance, suggesting moves now towards November/ December highs (“Resistance 1”). The prior 2023 resistance should now act as support for the pair (“Support 1”).
From the UK this week, focus will fall on Tuesday’s job and wage numbers. Rising wages remains a chief concern for the BoE (Bank of England) in their battle against inflation. A higher print this week will likely lead to markets adding onto raising interest rate expectations, and should see GBP continue to climb.
From Europe, first quarter GDP numbers are expected to be released on Tuesday, followed by April's inflation numbers on Wednesday. Since the last ECB meeting, interest rate expectations have eased in the market causing the EUR to weaken. Strong growth numbers and higher inflation numbers may give the EUR support.
As long as the GBPEUR pair remains above “Support 1”, then “Resistance 1” could well be tested.
GBPEUR breaks April downtrend
“Support 1” remained intact towards the end of the month, attracting the GBP buyers and causing a break in the downtrend on the last day of the month. The break was also complete following a “Resistance 1” breakthrough, as end of year rate projections converged further. 2023 highs (“Resistance 2”) could be on the cards.
UK data points thin on the ground this week, so EU area news should dictate moves. EU and German GDP numbers will be out this week and stronger growth numbers should give more room for the ECB to continue their rate hike cycle. German inflation numbers are also out this week and higher numbers here could point to a 0.50% hike in May.
German inflation numbers last week showed prices eased in April, this week markets will focus on the inflation numbers for the Euro area ahead of the ECB rate decision on Thursday. A 0.25% rate hike is priced in with another 0.50% worth of hikes is expected for the rest of the year, but the same is priced for the UK. An overtly hawkish ECB will be needed to stop GBPEUR running higher.
GBPEUR continues sideways move
Since hitting the 2023 high earlier this month, GBPEUR has steadily been in a downtrend with the downtrend resistance capping gains seen earlier in the week, after markets converged rate expectations between the BoE (Bank of England) and the ECB (European Central Bank).
“Support 1” came into play again, following this move higher, as the April downtrend continued to prevail.
UK data points are thin on the ground this week, so EU area news should dictate any moves. EU and German GDP numbers will be out this week, the presence of stronger growth numbers should give more room for the ECB to continue their rate hike cycle.
German inflation numbers are also out this week, higher numbers here could point to and suggest a 0.50% hike in May.
Uptrend broken
The 2023 highs continue to act as resistance for further gains on the GBPEUR pair and it seems that the longer-term uptrend is now broken, bringing in the potential for GBPEUR to target the March support and the then February support level.
This week, focus on GBP will come from the UK with jobs, inflation, retail sales, and PMI data. Currently, markets are pricing in a 0.25% hike by the BoE (Bank of England) in May, however, recent comments from the BoE have suggested a pause in hikes. Should the data points disappoint, then the chances of a 0.25% hike in May will reduce, which would be negative for GBP.
Continued support for the EUR can be seen in the form of rate hike expectations from the ECB (European Central Bank), as markets continue to price in 0.78% worth of rate hikes across the year. This week’s focus is expected to back this call, will come from inflation numbers and PMI data for the month of April. Higher inflation and good economic output should continue to support the EUR.
China GDP this week will also be in focus, as the China re-growth story continues to be one of the supporting factors for the EUR.
The diverging monetary policy between the BoE and the ECB still seems to be the biggest mover on the GBPEUR pair.
February's uptrend still supported?
The 2023 highs continue to act as resistance for further gain on the pair, whilst the February uptrend continues to support price action higher.
This week, UK data in the form of February’s GDP, industrial, and manufacturing production figures is expected to be released on Thursday, with BoE members Bailey, Tenreyro, and Pill all set to speak this week as well.
Very little is set to come from Europe this week, with retail sales data expected as well as inflation numbers from Germany.
At Equals Money, our in-house currency experts are here to help you. We monitor the markets for you and let you know how any changes could affect your payments to help you navigate volatility within the currency markets.
We also offer a number of hedging solutions to help you manage the associated risks when dealing with foreign exchange and volatile markets, such as market monitoring, the Equals Money Rate Watch, forward contracts, and market orders.1 Your own dedicated account manager will be on-hand to guide you through all your options so you can make the best decision for you and your business.
You can’t control what happens in the market - but you can control how you manage volatility and risk and take care of your company. Equals Money is here to help you with your finances so you can spend less time worrying about FX rates and more time growing your business.
1Equals Money can only offer forward contacts to facilitate payments for goods and services
Sign up to our daily market reports to get the latest news and insights on worldwide currency movements straight to your inbox every morning.
Enter your email address below to subscribe.
