The Pound Sterling to Euro (GBP/EUR) exchange rate ticked higher by around 0.29% on Monday morning.
After Bank of England (BoE) Governor Mark Carney stated on Friday that inflation will rise, a contrasting statement to comments made previously by the BoE’s chief economist, the Pound strengthened versus may of its major peers. Monday morning has seen Sterling hold gains versus many of its currency rivals ahead of domestic data due later.
The Euro, meanwhile, edged lower versus many of its major competitors amid speculation that Greece’s reform proposal will not be accepted. These speculations are justified considering that previous proposals had been rejected by creditors.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3688.
Previously…
As last week ended the Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3708.
For much of the week the Euro had been pushing higher against the Pound and other major peers as economic data out of the member Eurozone suggested that the region’s economy is finally gathering strength. Spain’s economic growth was revised higher by the Bank of Spain on Thursday and data out of France was showing signs that the currency areas second largest economy is starting to show signs of improvement.
Sterling meanwhile had been under pressure earlier in the week on expectations that the Bank of England (BoE) will leave interest rates unchanged after UK inflation was shown to have fallen to a record low level of zero on Tuesday.
As the week ended, the Pound rallied strongly after Bank of England Governor Mark Carney said the next move for the nation’s interest rates would be an upward one. Also supporting the currency were comments made by the central bank’s deputy governor Ben Broadbent. He suggested that low inflation is in face a positive for the UK economy and British consumers.
‘My guess is that, with the financial system improving, and signs that the worst fears about the global economy may be subsiding, the neutral real interest rate is more likely to rise than fall over the next couple of years. Over that period, headline inflation will get a sizeable kick upwards, once the falls in food and energy prices drop out of the annual comparison,’ Mr Broadbent said in a speech at the Imperial College Business School in London.
Looking ahead to next week the Pound could once again test the 1.40 level against the Euro if reform proposals put forward by Greece are rejected by its creditors in the European Union.
‘We support the people that have a lost a lot as a result of the crisis and we prepared, if things do not go well, for a clash. Our partners must know that we are prepared for a falling out, otherwise you don’t negotiate,’ said Euclid Tsakalotos, minister for international economic affairs.
The list of reforms will need to be approved before Athens is granted a new round of aid to avert another financial crisis.
If the reforms are rejected, fears of a ‘Grexit’ will send the single currency tumbling lower.
The GBP/EUR currency pair could be influenced by risk sentiment if the conflict in the Middle East escalates.
German inflation and Eurozone sentiment reports will likely create volatility for the Euro on Monday.
The main piece of data due to influence the Pound Sterling will be Tuesday’s UK GDP report.
