Sterling has plummeted below the key 1.25 level on Wednesday as the Scottish referendum outweighs the recent European Central Bank stimulus measures in terms of trader focus.
The GBP to Euro exchange rate is currently trending in the region of 1.2430.
Tuesday’s fractional boost for the Pound to Euro exchange rate has all but disappeared as Carney’s hawkish remarks on the Scottish bid for independence had no lasting effect. Bank of England Governor Mark Carney, addressing the TUC Congress in Liverpool, suggested that wage growth is likely to increase by the middle of next year and the benchmark interest rate could potentially rise in spring-time. He also took a firm stance on Scotland’s usage of the Pound, suggesting that should they gain independence their use of the Pound would be ‘incompatible with sovereignty’.
Tuesday wasn’t exactly ideal for the single currency either as the European Central Bank stimulus proves to be too big a risk for investment. A lack of influential, market moving data didn’t help curtail the Euro downtrend.
The Pound to Euro exchange rate has hit a low today of 1.2395.
With a lack of influential domestic data until Wednesday afternoon the Pound has continued to feel the effects of the Scottish independence campaign. The testimony on Augusts’ inflation report by high-profile policymakers from the Bank of England is likely to spark a little Sterling movement, although it is widely acknowledged that there is very little likelihood of significant alterations.
Wednesday’s European economic data, whilst not very influential upon wider market movement, has printed reasonably positively. French Industrial Production equalled the previous figure of -0.9% having avoided the market consensus of further contraction to -2.52%. Spanish Industrial Production rose from the previous figure of 0.7% to 0.8%, but failed to meet with the expected growth of 2.2%. The Greek inflation rate also proved to be better than expected at -0.3% having been forecast to contract by -0.71%.
Thursday’s Forecast for the Pound to Euro Exchange Rate
A lack of British economic data on Thursday is unlikely to make a huge difference as trader focus has been completely dominated by the Scottish bid for independence. It is unlikely that Sterling will make any meaningful gains until the conclusion of the Scottish referendum on September 18th.
There are a few European economic data publications, however, which have the potential to trigger volatility for the single currency. Both the German Consumer Price Index and the EU Harmonised German Consumer Price Index are forecast to maintain the previous figure of 0.8%. The ECB will also be publishing their monthly report which could potentially give insight into the recent stimulus measures and the effect it has had at this early stage.
The Pound Sterling to Euro exchange rate has reached a high today of 1.2483.
UPDATE
The GBP to Euro exchange rate rallied back above 1.25 on Thursday as a survey conducted by Survation indicated that ‘Yes’ voters might not win the day when the Scottish vote on the issue of independence next week.
Unionists swung a 6% lead in this most recent poll and the Pound posted gains across board as a result.
As well as gaining on the Euro the Pound was able to move away from a multi-month low against the US Dollar.
In the opinion of one industry expert, the outcome of the independence vote is ‘very hard to predict. Referendums are difficult for polling companies, but I’m increasingly of the view that it will be a tight win by No.’
The Pound Sterling to Euro exchange rate was little-changed following the publication of Germany’s final Consumer Price Index for August and may manage to hold its gains in the hours ahead.
UPDATE
The GBP to Euro exchange rate was holding above the 1.25 level on Friday but gave up some ground after the latest UK Construction Output data came in below expectations.
The data showed that output stagnated at 0.0% on a monthly basis in July and fell to 2.6% from the preceding month’s figure of 3.2% on a year on year basis.
Sterling is set to remain under pressure over the weekend, as the market will focus upon the Scottish Referendum. New polls are due to be published and any indication that the pro-independence Yes campaign was gaining ground will likely know the Pound lower.
