The Euro to Pound Sterling (EUR/GBP) exchange rate is forecast to make gains next week, as market sentiment towards the UK currency will come under pressure ahead of Thursday’s general election. With the outcome of the vote far from certain, Sterling is likely to weaken against most major peers including the US Dollar (USD) as it becomes volatile.
The Euro to Pound Sterling Exchange Rate Hit a Weekly High Of 0.7359
The Euro ended the week on a high against the Pound as the UK currency was weakened by a string of disappointing economic data releases. At the start of the week, the Pound was softened by the release of business optimism data from the Confederation of British Industry (CBI). The report showed that optimism tumbled from 15 to 3 in April.
A separate industrial trend orders report also disappointed by sliding from March’s figure of 4 to 1. The Euro also came under pressure in Monday’s session as data showed that the number of French people claiming unemployment benefits rose from 12.8k in February to 15.4k in March. Economists had been expecting a sharp fall to 5.1k.
On Tuesday, the Pound fell sharply as GDP data showed that the UK economy expanded by just 0.3% in the first quarter of 2015. The figure was well below the preceding quarter’s figure of 0.6% and disappointed economist expectations for a growth rate of 0.5%.
Midweek, the Euro remained under pressure as consumer confidence and industrial sentiment was shown to have fallen in April. The cause of the drop was blamed on the uncertainty caused by the Greek situation. On the same day the US Dollar was sent tumbling as GDP in the world’s largest economy was shown to have tumbled from 2.2% to just 0.2% as bad winter weather had a huge negative impact.
On Thursday, the Euro rallied strongly and advanced to multi-week highs against both the Pound Sterling and US Dollar as data showed that the Spanish economy improved strongly in the first quarter of the year and Eurozone inflation recovered from deflation. The single currency then advanced to its best level in 10-weeks against the US Dollar as Greece offered significant concessions to its creditors, raising hopes that a deal will be reached soon.
On Friday, the Pound weakened further as a manufacturing PMI came in below expectations. The PMI fell to a 7-month low of 51.9 in April.
Looking ahead to next week, the major data releases for the EUR/GBP exchange rate and EUR/USD exchange rate will be Tuesday’s US balance of trade and ISM non-manufacturing PMI figures, Wednesday’s Eurozone retail sales data and Thursday’s UK general election.
If no party wins a majority in the UK election, the Pound will drop as investor jitters will increase over the makeup of a coalition government.
With tensions in Ukraine building once again, investors will want to keep an eye on events in the war-torn nation.
If data out of France comes in as poorly as expected, any Euro gains are likely to be restrained.
The Euro weakened as the week got underway as worries over the French and Greek economies weighed. Manufacturing activity in both nations was shown to have contracted again in April.