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Euro to Pound Sterling Exchange Rate Forecast: EUR/GBP Weakens on Greece Worries, UK Election Ahead, EUR/USD Falls


The Euro to Pound Sterling (EUR/GBP) exchange rate weakened on Tuesday as Monday’s weak PMI data for France and Greece raised worries and as concerns over Greece’s debt negotiations continued to weigh upon sentiment. The Euro to US Dollar (EUR/USD) exchange rate was also weaker.

The Euro to Pound Sterling (EUR/GBP) Exchange Rate Softened To a Session Low of 0.7312

On Monday, the UK markets were closed for the May bank holiday weekend, but in Europe, it was business as usual. The Euro came under pressure from data, which showed that manufacturing activity across the Eurozone softened in April, suggesting that the single currency has gotten the second quarter off to a disappointing start. The Purchasing Managers Index (PMI) came in at 52 from an initial flash reading of 51.9, but was below March’s figure of 52.2.

The main cause for the PMI’s drop was more disappointing data out of France and Greece. The French manufacturing PMI fell from a reading of 48.8 in March to 48 in April. Greece’s PMI tumbled to a 22-month low of 46.5, a drop from the preceding month’s level of 48.9. Germany also saw a slight decline from the 11-month high recorded in March.

‘The Eurozone manufacturing sector continued to grow in April, but the dip in the rate of expansion will serve to check recent optimism that the ECB’s quantitative easing programme has bought a guaranteed ticket to recovery for the region. Warning lights are flashing particularly brightly over France and Greece, both of which saw accelerating rates of decline at the start of the second quarter. Weaker rates of growth in Germany and Ireland are also cause for concern,’ said Chris Williamson, chief economist at Markit.

UK Construction PMI Softens

As Tuesday’s session progressed, the Pound eased from its earlier session high as the currency came under some pressure as UK domestic data showed that momentum in the construction sector slipped in April due to the uncertainty over the outcome of Thursday’s general election. The construction PMI fell from the 57.8 recorded in March to 54.2. It was the slowest rate of expansion seen for 22 months.

The Euro meanwhile found some support from data, which showed that producer price inflation across the Eurozone rose for a second consecutive month in March. The report eased some of the concerns over the threat of deflation.

Following on from that, was the announcement made by the European Commission that Greece’s growth forecast has been slashed by 2%. Brussels now expects Greece’s GDP to expand by just 0.5% in 2015, a big drop from its previous forecast for growth of 2.5%.  The report added to concerns over Greece’s fiscal position and as a result kept the Euro down against its major peers.

The Euro to US Dollar (EUR/USD) Exchange Rate Fell To a Session Low Of 1.1064

The Euro was also weakened against the US Dollar as data out of the USA suggested that the world’s largest economy will recover from a slowdown in the first quarter. Data released on Monday showed that U.S. factory orders rose at the fastest pace in eight months in March.

The US Dollar could make further gains later in the session if upcoming Markit PMI and ISM Non-Manufacturing PMI reports come in positively.