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Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast: Greece’s Six-Day Ultimatum, IMF Payment Made, BoE Interest Rates Held

The Euro to Pound Sterling (EUR/GBP) exchange rate climbed in Thursday’s European session after the UK trade deficit widened by more- than- forecast on account of falling exports to the USA.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Flops on UK Data Ahead of BoE Interest Rate Decision

The Trade Balance ecostat came in at £-2.859B in February after predictions for a much smaller £-0.16B following January’s £-0.18B. Moreover, a widening in the trade deficit is not good news for the Conservative party in the run-up to the May general election.

This week saw the Bank of England’s (BoE) Financial Policy Committee (FPC) warn that a high current account deficit could be a factor of concern and therefore a close eye would be kept on upcoming ecostats. It appears as if the UK’s export sector may need to be revamped in an attempt to bring the deficits down.

Furthermore, previous Trade Balance ecostats have been negatively revised, which means that former months were further from forecasts than first thought. A lot of February’s widening is thought to be a result of a decline in manufactured goods to the USA.

However, there was more bad news on Thursday when the UK’s Halifax House Price figure printed below forecasts at 8.1% in the three months through March on the year, from the previous 8.3%. However, the month of March showed a 0.4% rebound in house prices, rather than the 0.1% prediction.

Economist Martin Ellis commented: ‘The recent return to real earnings growth for the first time in several years, very low mortgage rates and last December’s stamp duty changes are supporting housing demand. The rising level of house prices in relation to earnings should, however, curb house price growth and activity.’

‘The annual rate of house price growth, which has continued to ease in the first quarter of 2015, is forecast to end the year at 3-5%.’

The Bank of England (BoE) is scheduled to announce its latest interest rate decision later in Thursday’s session which could cause the Pound Sterling to Euro (GBP/EUR) exchange rate to fluctuate significantly.

UPDATE: The Bank of England advocated keeping interest rates on hold this month; investors will await the meeting minutes in a few weeks time to see if a policymaker divergence occurred.

Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast

The Euro to Pound Sterling (EUR/GBP) exchange rate is expected to be in for some moderate swings on Friday with the release of UK Industrial Production and Manufacturing Production ecostats. Furthermore, with Greece still in negotiations with creditors regarding its austerity deal, the Euro exchange rate could tip at any moment.

Greece is due to make a payment to the International Monetary Fund (IMF) on Thursday and while some accounts on Twitter have confirmed payment has been made, nothing’s been officially confirmed.

Many economists had suggested that Greece may default on the payment as it’s on the brink of running out of funds.

As negotiations continue to get nearer to deadlines, the Euro could experience some movement on any developments.

Foreign exchange market analyst Michael Hewson stated: ‘Yesterday’s talks between Greece and the Eurogroup ended with the Eurogroup issuing the Greek’s with an ultimatum to present acceptable proposals for fiscal, pension and labour market reform in the next six days, whatever that means.’

‘Given that we’ve been here so many times before, ultimatums generally only work when there is a threat of a significant sanction at the end of the deadline, and short of throwing Greece out of the Euro it would seem that any sanction is likely to be limited, particularly if Greece continues to muddle through.’

UPDATE: Greece made its scheduled payment to the IMF to the relief of investors, but lack of progress in negotiations appeared to be frustrating finance heads.

The Euro to Pound Sterling (EUR/GBP) exchange rate is trading at 0.7240; the Pound Sterling to Euro (GBP/EUR) exchange rate is trending in the region of 1.3815.