The Pound Sterling to Euro (GBP/EUR) exchange rate declined by around -0.16% on Friday morning.
After appreciating significantly on Thursday as a result of easing tensions with regards to the potential for a Grexit, the Euro held gains on Friday. With Athens reassuring creditors that they will continue with the bailout program despite ongoing disagreements with Germany, sentiment towards the shared currency improved.
The Pound, meanwhile, softened versus many of its most traded currency competitors on Thursday after Bank of England (BoE) Governor Mark Carney made a dovish speech in which he said he was in no rush to hike rates. Friday has seen the Pound continue to weaken thanks to disappointing construction data.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3998.
Pound Sterling (GBP) Exchange Rate Edges Lower on Disappointing Data
Thursday’s dovish comments from Mark Carney had a significantly detrimental effect on the Pound and diminished recent gains. Carney suggested that rate increases would be drawn out over a period of three years with gradual increments.
As we draw ever closer to the general election, there is a theme amongst policymakers who are unwilling to act amid such political unknowns. ‘A messy election result has the potential to subdue the recovery in business investment, which already looks shakier than it did six months ago,’ said Samuel Tombs at Capital Economics.
‘The fact that Carney is warning about the impact of low inflation for a prolonged period of time is very important and consistent with what we believe will be a challenging environment after the election,’ stated Ian Stannard, European head of FX strategy with Morgan Stanley in London.
Friday has seen a continuation of the Sterling depreciation after domestic data failed to impress. January’s seasonally-adjusted Construction Output declined by -3.1% on the year, well below the forecast growth of 2.1%.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3976 today.
Euro (EUR) Exchange Rate Recovers as Grexit Potential Eases
Prime Minister Alexis Tsipras reassured creditors that he intends to continue with the bailout program despite the ongoing spat with the currency bloc’s most influential economy. This eased tensions regarding the potential for a Greek exit from the Eurozone.
‘There is no reason for concern… even if there is no timely disbursement of a (loan) tranche, Greece will meet its obligations,’ he told reporters.
‘We are here in order for the OECD to put its stamp on the reforms that the Greek government wants to push on with and I believe that this stamp in our passport will be very significant to build mutual trust with our lenders.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Soften
Given the lack of data to provoke changes, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to continue trending lower over the course of Friday’s trade. There is a slight potential for GBP/EUR volatility later on Friday afternoon when the BoE’s Andrew Haldane makes a speech in New York.
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.4052 today.
