The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a tight range on Wednesday morning.
In response to mixed results from British economic data, the Pound is generally trending lower versus most of its major peers, although it is holding gains versus the single currency and the US Dollar. The depreciation can be linked to speculation that Bank of England (BoE) Governor Mark Carney will make dovish comments in the Mansion House speech later this evening.
The Euro, meanwhile, softened versus most of its rivals as Greek Prime Minister Alexis Tsipras prepares to meet German Chancellor Angela Merkel and French President Francois Hollande to discuss the latest reform proposal submission. Given that some officials have stated that the ‘fresh’ proposal was in fact just a rehash of previous attempts, analysts fear that the meeting will not be a success. These concerns have been exacerbated by European Commission President Jean-Claude Junker, who is still refusing to meet with the Greek PM.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3626.
Pound Sterling (GBP) Exchange Rate Forecast to Hold Steady against the Euro ahead of Mansion House Speech
British economic data produced mixed results on Wednesday, which has seen the Pound edge lower versus its rivals. On the year, April’s Industrial Production came in at 1.2%; an impressive leap above the median market forecast 0.6% growth. April’s Manufacturing Production, however, failed to meet with the market consensus of a 0.4% annual increase, with the actual result showing 0.2% growth. The NIESR Gross Domestic Product Estimate, due for publication later on Wednesday afternoon, is likely to impact upon Sterling movement.
Sterling trade is unlikely to be particularly volatile ahead of tonight’s Mansion House speech, however. Chancellor George Osborne is set to outline his intensions for maintaining a budget surplus and how that will be achieved. Also, BOE Governor Mark Carney will be making a speech about the UK’s monetary policy outlook. In the previous Mansion House speech, Carney suggested an interest rate hike was closer-than-expected, but a year later traders are still waiting. Many now think Carney will be much more dovish as recent indicators show that the UK is not ready for a benchmark rate hike.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3577 today.
Euro (EUR) Exchange Rate Forecast to Trend within Narrow Range against the UK Asset as Tsipras Attempts to Secure Aid
The single currency fluctuated considerably on Tuesday after Athens submitted a fresh proposal to unlock bailout funds. The appreciation following this news was short-lived, however, after many officials stated that the plan showed little deviation from previous drafts. Tsipras meets with Hollande and Merkel today in order to discuss the new proposal.
‘Should an agreement be reached on Greece, we would expect a sharp rally of the order of 5%. As we have said before, we see downside risks being limited, even in the event of an ‘accident’, because the ECB is able to intervene to limit the risk of contagion,’ stated analysts at Bank of America Merrill Lynch.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Edge Higher on Greek Woes
Given that officials have stated that the new Greek reforms weren’t new enough, and with Athens refusing to budge on electoral red-lines, the latest meeting in Brussels is unlikely to see any significant progress made. Should this be the case, the Euro will soften versus its major peers. The Pound, meanwhile, is unlikely to strengthen considerably ahead of the Mansion House speech, although the GDP estimate may have an impact. A lack of European economic data on Thursday should see trade continue to be dominated by geopolitics.
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.3660 today.
Comments are closed.