The Euro to Pound Sterling (EUR/GBP) exchange rate is trending within a tight range on Tuesday morning.
After Austrian National Bank Governor Ewald Nowotny warned that the Eurozone may have negative inflation rates for a considerably time, the shared currency slumped versus the majority of its most traded peers.
The Pound Sterling, meanwhile, is generally softer versus most of its major peers as traders await construction data which is forecast to tick lower from 57.6 to 57.0.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7543.
The Euro to Pound Sterling (EUR/GBP) exchange rate strengthened by around 0.65% on Monday morning.
Although European data printed mostly negatively on Monday, the common currency strengthened versus the majority of its most traded currency rivals. This can be attributed to speculation that the Swiss National Bank (SNB) will intervene in the markets in order to devalue the Franc.
Additionally, speculation that the SNB will maintain an unofficial Euro cap aided the single currency uptrend.
The Pound Sterling, conversely, softened despite a better-than-expected headline manufacturing figure. This is as a result of traders speculating that Thursday’s Bank of England (BoE) rate decision will show yet more inaction from dovish policymakers.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7542.
Euro (EUR) Exchange Rate Gains despite Poor Data
European manufacturing data printed poorly on Monday, but it had minimal impact on the shared currency. The Italian Manufacturing PMI failed to surpass the 50 mark which separates growth from contraction, although it did improve upon the previous figure.
Similarly, the French Manufacturing PMI stayed in contraction territory, and declined from the precious figure. The German Manufacturing PMI managed to show growth of 50.9 but hovers close to contraction. Eurozone manufacturing managed to equal the median market forecast of 51.
However, news that the Swiss National Bank may be trying to maintain an unofficial Euro cap in order to devalue the Franc caused the Euro to surge. ‘It is chatter that there is an informal band and the sight deposits data suggests that the SNB is there in the market,’ said Manuel Oliveri, FX strategist. ‘The SNB is trying to smooth the flows and the volatility. Also we are seeing that our clients are staying away from this currency because of the all the volatility that we have seen.’
The Euro to Pound Sterling (EUR/GBP) exchange rate dropped to a low of 0.7488 today.
Pound Sterling (GBP) Exchange Rate Softens on Negative Sentiment towards BoE
With the BoE rate decision fast approaching, most traders speculate that policymakers will continue on their dovish course by holding rates and continuing with quantitative easing. In response to these anxieties, Sterling softened versus the majority of its most traded currency rivals.
On first appearance, the headline figure from the UK Manufacturing PMI looked impressive, but underlying issues weighed on the British asset.
Rob Dobson, Senior Economist, said; ‘The domestic market remains the main growth driver, as the UK economic recovery provides a steady stream of new business. There were also signs of improvement in overseas markets, with new export orders posting the first meaningful gain for five months, but it still looks as if lacklustre demand from the Eurozone in particular remained a headwind for British manufacturers.’
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Hold Gains
With an absence of data to provoke volatility, and with the UK’s general election fast approaching, the Euro to Pound Sterling (EUR/GBP) exchange rate is likely to hold gains for the remainder of Monday.
The Euro to Pound Sterling (EUR/GBP) exchange rate reached a high today of 0.7565.