The Euro to Pound Sterling (EUR/GBP) exchange rate made further gains on Thursday as UK house price data weighed on Sterling. Despite the rise the single currency is forecast to see further upward movement restrained as concerns over Greece continue and as France and Italy released more disappointing data.
Inflation in France fell more than forecast and industrial production in Italy declined sharper than expected.
The Euro to Pound Sterling (EUR/GBP) exchange rate strengthened as the session progressed as UK trade balance data came in below economist forecasts and as the single currency took advantage of a weakened US Dollar (USD).
Earlier the Euro to Pound Sterling (EUR/GBP) exchange rate softened on Wednesday due to more disappointing economic data out of France and as economists grow increasingly concerned over the political situation in Greece.
According to data released early in the session, the stagnating French economy came under further pressure as industrial production in the nation was shown to have declined by 0.8% in October, a figure which fell well short of economist forecasts.
Economists had been expecting the report to show that industrial production improved by 0.2% on a monthly basis from the 0% level of stagnation recorded in the preceding month. On a yearly basis, French industrial production is now 1% lower than last year.
Also disappointing traders was manufacturing data, which showed that production fell by 0.2% in October. September’s gain of 0.6% was also revised lower to just 0.3%. On an annual basis, manufacturing production is now 0.6% smaller than 2013’s level.
The weak data bodes poorly for economic growth in the fourth quarter of 2014.
The poor performance of the economy has led to President Francois Hollande’s popularity plummeting. His proposals to try to reinvigorate the economy are likely to struggle as the nations woes are deep rooted and will be tough to tackle.
Grexit Fears Return
Also weighing upon the Euro is growing concern over the situation in Greece. Worries are mounting that Greek Prime Minister Antonis Samaras’s chosen candidate for next week’s presidential elections will not receive enough support. If he fails to win, support three times then under the nation’s constitution a general election will have to be called, something that the markets fear would lead to a defeat for Samaras and victory for the hard left Syriza party.
‘Grexit had fallen off the list of things that European investors are worried about but it returned with a vengeance yesterday; the prospect of a presidential vote in Greece next week, followed by a general election which based on current poll ratings could see the Syriza party in government saw investors take fright. Such an administration would be highly unlikely to follow the fiscal constraints imposed by the IMF/EU bailout plan, and much more likely to prioritise how to exit the bailout,’ said Ian Williams, an analyst at Peel Hunt.
Euro to Pound Sterling Exchange Rate
The Euro to Pound Sterling exchange rate reached a session high of 0.7943
The Euro to Pound Sterling exchange rate reached a session low of 0.7913
The Euro to Pound Sterling exchange was trading in the range of 0.7934
