The Euro to Pound Sterling (EUR/GBP) exchange rate softened on Tuesday as UK Construction PMI data supported the UK currency and as concerns over Greece countered the benefits of a strong German retail sales report.
The Euro to Pound Sterling Exchange Rate touched a session low of 0.726
Strong German retail sales data was somewhat countered by the publication of a report which showed that investor expectations for a Eurozone breakup climbed to the highest level in two years.
February’s Sentix Euro Break-up Index (EBI) came in at its highest level since 2012 as 38% of respondents said that they expect the currency bloc to break apart over the next 12-months.
Greece Worries Raise Euro Collapse Concerns
The figure was a rise from the preceding months 24.3%. The poll was conducted at the tail end of February during the height of the uncertainty over the Greek bailout extension.
The heavily indebted nation was granted a four-month extension to its bailout following intense negotiations between the Syriza led government and its international creditors.
Doubts over the bailout remain, as Greece must stick to austerity measures in order to receive the cash, something that Syriza pledged to end prior to the election. Pressure is mounting on Syriza from voters who accuse it of going back on its word.
‘The new aid programme for the country does not seem to be convincing, rather a ‘Grexit’ is now bound to be a constant topic among investors for the months to come,’ said Sentix senior analyst Sebastian Wake.
Expectations that Greece will leave the single currency bloc climbed to 37.1% from 22.5%.
Also putting pressure on the single currency was the Eurozone Producer Price Index which showed that the amount firms paid for goods fell for a fourth consecutive month. On a monthly basis the PPI fell -0.9% and annually by -3.4%.
Earlier in the session, the Euro had found support from data out of Germany, which showed, that retail sales in the Eurozone’s largest economy increased by their fastest pace in seven years in January. Monthly sales surged by 2.9% and annual sales soared by 5.3%. The numbers smashed economist forecasts.
Positive UK Data Supports Pound Sterling (GBP) Exchange Rate
Gains for the Euro against the Pound were held in check however as data showed that construction sector activity in the UK climbed to its best level in four months in February.
The Markit/CIPS UK construction PMI rose to a reading of 60.1, beating expectations for a slight dip to 59.0.
Growth was shown to have increased in the commercial, housing and civil engineering sectors.