The Euro to Pound Sterling (EUR/GBP) exchange rate softened by around -0.49% on Wednesday morning.
As we draw ever closer to the initial injection of liquidity into the Eurozone from the European Central Bank, speculation is mounting that President Mario Draghi won’t fulfil his promise of adding €1 trillion. These fears stem from predictions that the ECB will really struggle to source the necessary bonds to finance the operation. Domestic data has had minimal impact with QE overshadowing proceedings.
The Pound, meanwhile, edged lower versus many of its major peers after shop prices declined beyond expectations. However, services data due later on Wednesday morning has the potential to provoke changes.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7241.
Yesterday…
The Euro to Pound Sterling (EUR/GBP) exchange rate edged lower by around -0.11% on Tuesday morning.
European data printed relatively positively on Tuesday, but the shared currency failed to make any significant advance. This is as a result of comments made by European Commission Vice President Valdis Dombrovskis, who stated that there is a high possibility that Greece will require a third bailout deal once the current program expires.
The Pound, meanwhile, also saw little by way of impact from positive data. This can be attributed to ongoing political uncertainties as we draw closer to the British general election.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7268.
Euro (EUR) Exchange Rate Holding Steady despite Positive German Retail Sales
Tuesday’s German Retail Sales report was forecast to show annual growth of 3.0% in January, but the actual result reached 5.3%. ‘German retail sales got off to a very strong start in the new year on the back of (lower) energy prices and no doubt due to the (hike in) minimum wage,’ said Norbert Wuthe, senior analyst at Bayerische Landesbank.
However, the positives from domestic data were overshadowed by comments from Dombrovskis who suggested that Greece’s debt issues were far from resolved. ‘With the previous government, we were discussing how Greece would move back to the market financing with the help of a precautionary arrangement or enhanced-conditions credit line,’ Dombrovksis said. ‘Now this scenario, however, seems less likely, given recent financial instability.’
The Euro to Pound Sterling (EUR/GBP) exchange rate has fallen to a low of 0.7261.
Pound Sterling (GBP) Exchange Rate Little Affected by Positive Data
Similarly to the shared currency, the Pound gained little from positive data thanks to ongoing political uncertainties as we draw closer to the general election. With the UK Independence Party calling for a Brexit from the European Union, and with the Tories offering an EU referendum if they gain victory, the heightened possibility that Britain will leave the EU is weighing on investor confidence.
The UK Construction PMI eclipsed the median market forecast of a drop from 59.1 to 59.0, with the actual result climbing to 60.1. Tim Moore, Senior Economist at Markit said; ‘Stronger short-term growth momentum in February was matched by positive sentiment towards the year-ahead business outlook. However, some construction companies noted that the uncertain General Election outcome could prove a temporary bump in the road for new work, as some clients had sought to delay spending decisions.’
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Extend Declination
Although the general election is causing increased reluctance to invest in Sterling, Greece’s situation is likely to hold precedence in trader focus. Therefore, the Euro to Pound Sterling (EUR/GBP) exchange rate is likely to extend its declination over the course of Tuesday.
Wednesday’s Eurozone Retail Sales and British Services PMI have the potential to provoke volatility for the EUR/GBP pairing.
The Euro to Pound Sterling (EUR/GBP) exchange rate has reached a high today of 0.7290.
