The Euro to Pound Sterling (EUR/GBP) was little changed on Tuesday but the UK currency was weighed upon by the release of data which showed that GDP growth was revised lower and the nations current account deficit widened.
In a report, the Office for National Statistics said the U.K. current account deficit widened to £27.0 billion in the third quarter from £24.3 billion in the second quarter, whose figure was revised from a previously estimated deficit of £23.1 billion.
The Euro to Pound Sterling (EUR/GBP) exchange rate firmed on Monday as the single currencies recent drops were deemed as overdone. The Euro is forecast to remain under pressure ahead of Tuesday’s second round of Greek Presidential elections and as expectations grow that the European Central Bank (ECB) will introduce a quantitative easing programme in the New Year.
The Euro to Pound Sterling (EUR/GBP) exchange rate is forecast to weaken further next week, as attention will shift to Tuesday’s second Greek Presidential vote and as the markets wind down for the Christmas holiday season.
Concerns are growing that Greece is sliding towards a snap general election after the nation’s parliament failed to elect a new president in the first of three rounds of voting on Wednesday.
Prime Minister Antonis Samaras preferred candidate Stavros Dimas, failed to be elected as just 160 members of parliament voted for him. 40 more votes were required for a victory.
If the vote fails three times, then under the Greek constitution a snap general election will have to be called. Economists fear that the radical left-wing Syriza party could win such a vote. If that happens then the Eurozone crisis could reignite and with it, the prospect of a Greek exit from the Eurozone.
The second vote will take place on December 23. If that vote results with no president elected, then the third and final vote will be held on December 29.
The voting process has been rocked by scandal after Independent Greeks leader Panos Kammenos said that one of his MPs had been bribed to vote in favour of Samaras’ candidate. The argument has dominated headlines in the Greek media and puts the result of next Tuesdays vote further in doubt.
A recently conducted poll of 1002 Greek citizens showed that while 41% were unconcerned by the elections, 56.3% expect the political upheaval to destabilize the nation’s economic recovery.
Eurozone Confidence Data Could Move Euro to Pound (EUR/GBP) Exchange Rate
Next week is devoid of market moving economic data releases with the only data of interest for the Eurozone being published on Monday and Tuesday.
On Monday, the Eurozone’s consumer confidence data could offer some support to the single currency if it comes in better than expected.
Reuters said of last month’s data; ‘Eurozone consumer confidence defied market expectations of improvement and fell in November, a flash estimate from the European Commission showed on Thursday. The Commission said that consumer confidence in the 18 countries using the euro fell to -11.6 this month from -11.1 in October. Economists polled by Reuters had expected an improvement to -10.7.’
Gross Domestic Product data out of France and Retail Sales data out of Italy are likely to have impact on the Euro to Pound exchange rate, as most traders and economists will most likely be enjoying their Christmas holidays.
The UK meanwhile will release its latest current account and third quarter Gross Domestic Product data on Tuesday. Economists are expecting the nation’s current account deficit to have widened from -£23.1 billion to -£25.3 billion. If the figure is worse than expected than we can expect the Sterling to come under pressure.
The nation’s final third quarter Gross Domestic Product figure is forecast to have expanded by 0.9% on a quarter on quarter basis.
Last month the Office for National Statistics announced that the UK economy expanded by 0.7% in the third quarter and Markit economist Chris Williamson noted; ‘Companies have grown increasingly worried about deteriorating economic conditions in the Eurozone as well as geopolitical uncertainties linked to the crises in the Ukraine and Middle East, while closer to home the main concern is uncertainty arising from the General Election next year and how government policy may consequently change.’
On a year on year basis, the UK economy is expected to have expanded by 3.2%.
The remainder of the week will likely see little movement due to the closure of the financial markets as a result of the Christmas Holidays.
