Euro to Pound Sterling (EUR/GBP) Exchange Rate Recovers Losses
Over the course of Monday’s European session, the Euro to Pound (EUR/GBP) exchange rate clawed back some of its recent losses thanks to upbeat German data and bets that the common currency’s recent slide was overdone.
The EUR/GBP pairing advanced to a high of 0.7506 as Syriza formed a coalition (reducing Grexit fears) and Germany’s IFO Business Climate/Conditions indexes increased by more-than-expected.
Tomorrow the pairing could experience considerable volatility as a result of the UK’s growth figures for the fourth quarter. Investors will also be looking ahead to the Eurozone’s CPI and unemployment data – due out later in the week.
EUR/GBP Exchange Rate Could Fluctuate on German Data
Prior to the publication of Germany’s IFO Business Climate/Confidence figures, the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in a narrow range after falling on Sunday in response to the outcome of the Greek election.
The EUR/GBP pairing slumped as Syriza emerged victorious, but the common currency could recoup some of its extensive declines if the German ecostats print positively.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7485
EUR/GBP Exchange Rate Declines Expected as Syriza Wins the Day
The Euro to Pound Sterling (EUR/GBP) exchange rate is likely to extend declines this week as investors get to grips with Syriza’s election victory.
The pairing dropped to 0.7433 on Sunday.
The anti-austerity party took between 36% and 38% of the vote, smashing the New Democracy into second place. At present it isn’t clear whether Syriza has adequate backing to take charge of the country alone.
On Monday the EUR/GBP exchange rate could also experience volatility as a result of Germany’s IFO Business Climate/Business Conditions indexes.
The Euro to Pound Sterling (EUR/GBP) exchange rate closed out the week trending in the region of a seven-year low as central banks created yet more chaos in the currency market.
EUR/GBP Exchange Rate Trending Lower after SNB, ECB Decisions
Two weeks of financial shockers and policy upheaval saw the Euro to Pound Sterling (EUR/GBP) exchange rate hit its lowest levels since 2008.
The storm started with the Swiss National Bank (SNB) and its decision to go against recent rhetoric and policy pledges by scrapping its 1.20 cap with the Euro and pushing interest rates further into negative territory.
The move caught investors and economists on the hop and triggered almost unprecedented shifts in the currency market.
While the Swiss Franc soared, the Euro came under immense pressure and dropped to multi-year lows against several of its rivals.
At the time the Wall Street Journal reported; ‘The SNB’s move last Thursday to drop its cap of 1.20 Swiss Francs-per-Euro sent the value of the Franc soaring, upsetting currency and equity markets and inflicting heavy losses on banks, foreign exchange brokers and Switzerland’s many export-reliant companies.’
‘The Franc gained as much as 29% in value versus the Euro and 28% against the Dollar shortly after the SNB’s move, and remains at elevated levels relative to both currencies. Firms and financial market players appeared to be blindsided by the central bank’s sudden dumping of a policy it has doggedly defended for 3½ years, raising questions about the SNB’s ability to credibly signal its intentions and help grease the wheels of both the Swiss economy and international markets.’
The common currency remained under immense pressure during the build up to the European Central Bank’s (ECB) interest rate announcement as some investors predicted that the central bank would exceed stimulus expectations and others prepared for disappointment.
On Thursday, the ECB outlined a long-anticipated quantitative easing programme. The proposed asset purchase scheme will last for eighteen months and amount to over 1 trillion Euros – exceeding even the most optimistic of estimates.
In the view of industry expert Lennon Sweeting; ‘This is just the beginning for Europe. This kind of programme tends to get extended, so I don’t think it would be any sort of massive surprise if we did hear a year-and-a-half down the road that there’s going to be QE2.’
The decision subjected the Euro to another kicking, and the common currency extended declines against the Pound and US Dollar.
The Euro to Pound Sterling (EUR/GBP) exchange rate dropped to a 7-year low.
The Euro to US Dollar (EUR/USD) exchange rate slumped beyond an 11-year low.
Greek Election Ahead – ‘Grexit ‘ Concerns to Create EUR/GBP Exchange Rate Movement
Unfortunately for the Euro, political developments could see the common currency beaten down further over the weekend.
From the start of the global economic crisis to what could be viewed as its pinnacle in 2012, Greece has been in the spotlight.
Fears that the heavily-indebted nation would have to leave the Eurozone did fade as circumstances improved, but were brought back to the fore towards the close of 2014 as Greece called a snap election.
If Syriza is victorious in Sunday’s election and proceeds with its policy pledge to challenge the austerity measures imposed on the nation by the Troika, Greece could be expelled from the (currently) 19-nation currency bloc.
According to the BBC, current PM Antonis Samaras and leader of centre-right New Democracy has ‘promised to work “day and night” to keep the country standing. Syriza, he argues, could force the country from the euro by its policies, serving what he called the “drachma lobby”, a reference to the former Greek currency. He also warns that Greece could miss out on a massive programme of quantitative easing unveiled by the ECB last week to help stimulate the Eurozone economy.’
The repercussions of such an event could take a heavy toll on the Eurozone’s already fragile economic outlook – so the Euro is likely to experience extensive volatility following the vote.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast
Aside from the Greek election, there are several things which could cause Euro to Pound Sterling (EUR/GBP) exchange rate movement next week.
While the economic calendar isn’t as full as it has been over the last few days, the UK is still set to publish fourth quarter growth data and consumer confidence figures – both fairly influential reports.
Although the UK’s low inflation outlook is likely to deter the Bank of England from increasing interest rates anytime soon, positive domestic reports would still be Pound supportive and could help Sterling extend its gains against the Euro.
At the close of the week the Euro to Pound Sterling (EUR/GBP) exchange rate was trading in the region of 0.7486
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3354