The Euro to Pound (EUR/GBP) exchange rate gave up its earlier gains and weakened as Thursday’s session advanced as worries over Greece were heightened after the Greek government appeared to defy the European Commission.
Athens announced that it was sticking to “red lines” on the nation’s pension and labour market reforms and urged lenders to give ground. The demands have dimmed prospects that progress will be made at next weeks Eurogroup meeting. Greece desperately needs to secure financial aid or else default on its debts.
‘One shouldn’t assume any kind of spectacular results — that is not within the realm of possibilities,’ said German Finance Minsiter Wolfgang Schaeuble.
The Pound Sterling to Euro (GBP/EUR) exchange rate weakened to a 3-month low of 1.33 on Thursday as investors focused on the UK general election. The vote promises to be the tightest in decades.
The Pound Sterling to Euro (GBP/EUR) Exchange Rate Slumped To a Session Low Of 1.3362
British voters took to the polling stations on Thursday to decide who will rule the United Kingdom for the next five years. With the outcome far from certain investors and the markets are watching the vote with nervous trepidation. The UK is the world’s fifth largest economy and whoever emerges the victor is likely to have to form a coalition with other smaller parties.
According to polls, Labour and Conservatives have been neck-and-neck, suggesting that neither party will win enough support to win an outright majority. The election also raises the possibility of a number of surprises as support for the anti-EU party UKIP has risen, and support for the Liberal Democrats has waned.
The Scottish National Party (SNP) however, appears set to wipe out Labour in Scotland and emerge as a potential kingmaker. This scenario has economists worried as both Labour and the Conservatives have ruled out the possibility of forming a coalition. Political uncertainty is likely to follow the election, as a round of negotiations will be needed. That could result in a coalition or it could result in a weak minority government.
‘As the UK goes to the polls, investors have plenty of other issues to focus on away from domestic politics. Yesterday saw core sovereign bond yields continue to head higher; Brent oil prices hit a new peak for the year, as US crude stocks fell for the first time since January; and Fed Chair Janet Yellen suggested that the current level of equity market valuations is ‘quite high’ and poses ‘potential dangers’, ‘ said Ian Williams from Peel Hunt.
Further gains for the Euro were restrained as economic data out of France and Germany came in below economist expectations.
German factory orders rose by 0.9% on a month-on-month basis in March, below economist expectations for a rise of 1.5%. The data marks a second consecutive decline in orders and may spark fears that demand for German goods is waning.
French balance of trade data showed that the nation’s trade deficit widened from €-3.6 billion to €-4.58 billion. Month-on-month industrial production, fell by -0.3% below expectations for 0.0%.