- Pound Sterling continues relief rally despite weak domestic data
- Euro cools from intraday highs following weak German consumer prices
- Soft US Dollar prevents greater Euro depreciation
- GBP/EUR exchange rate forecast to advance
Weak Domestic Data Fails to Weigh on GBP Exchange Rates
The Pound Sterling to Euro (GBP/EUR) exchange rate ticked fractionally higher by around 0.1% on Thursday afternoon.
The British Pound is enjoying a bullish run of late with domestic data seemingly ineffective, irrespective of results. The sharp, sustained appreciation is the result of easing concerns regarding the UK’s EU referendum vote, due to take place on June 23rd.
Following the initial announcement of the referendum date, the Pound declined massively. News in February that Mayor of London Boris Johnson was backing a ‘Brexit’ also weighed heavily on investor sentiment.
However, as time progressed many claimed the ‘leave’ campaign seemed increasingly weak considering the vast list of financial institutions and political heavyweights backing the ‘remain’ campaign. What’s more, the latest opinion polls have consistently given the lead to those voting to remain a member of the EU.
‘The UK is much stronger as a part of Europe, and Europe is much stronger with the UK as a driving force,’ said Angel Gurría, secretary-general of the Organisation for Economic Cooperation and Development (OECD). ‘There is no upside for the UK in Brexit. Only costs that can be avoided and advantages to be seized by remaining in Europe. No one should have to pay the Brexit tax.’
All this contributed to a sustained Sterling relief rally with investor sentiment vastly improved. Today’s weak domestic data, which showed house prices grew at a slower-than-forecast pace, had minimal impact with traders continuing to buy the UK unit.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2847.
Euro (EUR) Exchange Rates Cool from Daily Highs despite Weaker US Dollar
In the initial stages of Thursday’s European session the Euro held gains against the British Pound following positive German labour market data.
Germany’s Unemployment Rate met with the median market forecast 6.2% in April, with Unemployment Change showing some 16,000 fewer jobless people; bettering the market consensus of no change to the amount of unemployed citizens.
However, the single currency cooled from intraday highs following weak German inflation data. On the month, April’s German Consumer Prices declined by -0.2%. This highlights the mammoth task still facing the European Central Bank (ECB) as policymakers attempt to raise Euro-area inflation.
Capital Economics analyst Jennifer McKeown said; ‘German inflation is likely to remain very weak over the next couple of months before energy effects push it to around 1.5 percent by year-end. Even in the euro zone’s largest and arguably strongest economy, inflation seems unlikely to reach the ECB’s near 2 percent target over the medium term.’
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.2804 during Thursday’s European session.
GBP/EUR Exchange Rate Forecast to Extend Gains on ECB Stimulus Speculation
Now that German data has confirmed that inflation continues to fall, speculation that the European Central Bank will have no choice but to extend stimulus measures is likely to weigh on demand for the single currency. Even if the US Dollar holds its current weak position the Euro is unlikely to garner enough support to initiate a sustained uptrend.
Conversely, the UK unit continues to appreciate irrespective of domestic data results. As such, the GBP/EUR exchange rate is likely to extend gains and hold a strong position over the weekend.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.2872 during Thursday’s European session.
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