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Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Decline after Increased Likelihood of Conservative Majority

The Euro to Pound Sterling (EUR/GBP) exchange rate softened by around -0.42% on Friday morning.

After German Industrial Production failed to meet with expected growth, the shared currency slumped versus the majority of its most traded currency peers. The losses have been relatively fractional, however, after the German Trade Surplus bettered the median market forecast figure.

The Pound, meanwhile, advanced considerably versus most of its major peers as a Conservative majority win looks increasingly likely. Despite the fact that a Tory victory will see a referendum on the UK’s membership in the European Union (EU) called in 2017, the general consensus is that a Conservative government is best for British banks and businesses.

The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7271.   

Pound Sterling (GBP) Exchange Rate Forecast to Strengthen Across the Board despite Disappointing Trade Data

Although most analysts predicted a deadlock between the Conservative Party and the Labour Party in the British general election, the likelihood of a Conservative majority victory has increased significantly. This is seen as beneficial to British banks and businesses, although the potential for an EU referendum could see a turnaround for the British asset.

‘People will be surprised at the result,’ said Simon Walker, director general of the Institute of Directors. ‘Business is pretty resilient but there’s positive feeling about continuing on the same course and I think the markets will react well.’

Sterling gains have been somewhat slowed, however, after trade balance data failed to met with estimates. The British Trade Deficit narrowed from £-3.318 billion to £-2.817 billion, but missed the median market forecast of £-2.1 billion.

The Euro to Pound Sterling (EUR/GBP) exchange rate dropped to a low of 0.7223.

Euro (EUR) Exchange Rate Forecast to Soften versus many of its Major Peers after German Industrial Production Cooled

March’s German Industrial Production was forecast to rise by 0.5% on the year, but the actual result was  a 0.1% gain. ‘Today’s data have created uncertainty, rather than clarity,’ said Carsten Brzeski, chief economist at ING-DiBa AG in Frankfurt. ‘The German growth picture seems to be more mixed than buoyant sentiment indicators have been suggesting. Industrial production is clearly stagnating, reflecting still-weak demand from other Eurozone countries but also a continued investment drought.’

The single currency declination has been somewhat slowed by an improved German Trade Surplus. March’s Trade Balance eclipsed the median market forecast of a rise from 19.5 billion to 20.0 billion, with the actual result reaching 23.0 billion.

Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Hold Losses on Tory Victory

Provided the Tories manage a victory, which is looking increasingly likely, the Euro to Pound Sterling (EUR/GBP) exchange rate should hold losses for the remainder of Friday’s European session. EUR/GBP losses are further solidified by a lack of domestic data to curb the trend.

The Euro to Pound Sterling (EUR/GBP) exchange rate climbed to a high of 0.7313.