The Pound Sterling to Euro (GBP/EUR) exchange rate strengthened by around 0.34% on Tuesday morning.
Although British economic data printed disappointingly on Tuesday morning, the Pound strengthened versus the majority of its most traded currency rivals. This can be attributed to traders expecting that quantitative easing in Europe will be beneficial for the UK.
The Euro, meanwhile, softened versus most of its major peers as the situation in Greece escalates. The European Central Bank (ECB) President Marion Draghi is now urging Greece to reconsider its stance on Europe or the country could find itself without financial support.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3978.
Yesterday…
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a narrow range on Monday morning.
Although the potential for creditors rejecting Greece’s debt repayment program heightened significantly, and with Greece threatening a referendum, the shared currency advanced on Monday morning. This was due to improved sentiment towards the European Central Bank (ECB) after the launch of quantitative easing in spite of concern that they wouldn’t source the bonds required to finance the scheme.
After the accountancy and services group, BDO, reported that business costs had fallen for the first time since 2009, the Pound strengthened versus most of its major peers. Additional gains can be attributed to hopes that QE in the Eurozone, Britain’s biggest trading partner, will be beneficial for the UK.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3868.
Pound Sterling (GBP) Exchange Rate Advances on Falling Business Costs
In accordance with BDO, British businesses saw overall costs fall in February; the first drop in 6-years. BDO attributed the fall in costs to recent low oil prices.
Malcolm Thixton, partner at accountancy and business advisory firm BDO LLP in Southampton, said: ‘Businesses are well placed to take advantage of falling costs, to help them to bed in growth. Lower input prices will help entrench the recovery, as consumers gain more spending power. However, the economy still has substantial spare capacity.’
Sterling gains are likely to be somewhat laboured, however, with the forthcoming general election weighing on investor confidence.
The Pound Sterling to Euro (GBP/EUR) exchange rate has fallen to a low of 1.3849.
Euro (EUR) Exchange Rate Gains as ECB Launch QE
After many analysts feared that the ECB would fail to source the requisite bonds in order to finance the massive injection of liquidity in the Eurozone, Monday’s launch saw improved sentiment towards the central bank.
‘The QE purchases are having the expected effect and the market is very positive,’ said Michael Leister, a senior rates strategist at Commerzbank AG in Frankfurt. ‘In the core we’re seeing yields dropping sharply lower led by the ultra-long end so these are very much QE-style moves. Near-term it’s going to stay quite volatile because there are some sellers who did front-run these purchases and now are keen to sell.’
However, the common currency uptrend could see a reversal after it looks increasingly likely that Greece’s creditors would reject the proposed program of debt repayment. ‘If needed, if we encounter implacability, we will resort to the Greek people either through elections or a referendum,’ stated Greek Prime Minister Alexis Tsipras.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Fluctuate
Given the mounting unknowns regarding Greece’s place in the Eurozone, and with the forthcoming British general election weighing on trader confidence, the Pound Sterling to Euro (GBP/EUR) exchange rate has the potential to fluctuate over the course of Monday’s trade.
A lack of influential domestic data pertaining to both Britain and Europe on Tuesday may see quieter GBP/EUR trade. However, geopolitical developments could see heightened volatility for the shared currency in particular.
The Pound Sterling to Euro (GBP/EUR) exchange rate advanced to a high today of 1.3902.
