The GBP/EUR exchange rate dropped to the lows at the start of the week but as the day has come to an end, there has been a resurgence from the pound. At close of business the GBP/EUR rate resides at the 1.135 level which poises things nicely for a positive movement next week. This morning UK GDP for the second quarter was confirmed to show a fall of 0.2% to 1.5%. This came as a surprise as there was expected to be 1.7% growth from this time last year.

Eurozone inflation below expectation

As mentioned in my previous commentary Eurozone inflation showed signs of faltering with the release coming in 0.1% below the expected 1.5%. There has been warnings from the European Central Bank’s economists that EU inflation is set to fall with fears it may get below 1% at the start of 2018. The core Consumer Price Index data also showed a small drop which suggests the main influencers are under pressure, providing a clear indication there could be drop shortly.

What will happen to GBP/EUR in the next 2 months?

Now that we have seen Sterling gain 5% against the Euro in the last three weeks, a fall below 1.10 looks off the cards. I think there is a strong chance that the GBP/EUR rate could find itself above 1.15 in the near future especially with the talk from the Bank of England that interest rates could rise in November.

There is still potential for the European Central Bank to cut the current economic stimulus, but with the concern of inflation falling there could be a further delay. They have been talking about economic changes for the last 6 months however each time the crunch time comes there are delays. This could well continue to happen in the last few months of 2017 which suggests the GBP/EUR exchange rate could continue to rise.