‘Brexit’ Leaflet Controversy Drags on Pound Sterling (GBP) Exchange Rate Today
On Thursday morning the Euro to Pound Sterling (EUR/GBP) exchange rate has been trending higher, as investors continue to move away from the Pound. A row over a planned government pamphlet on the benefits on remaining in the European Union has triggered a fresh round of ‘Brexit’ volatility, weighing on sentiment this morning. As a result the EUR/GBP exchange rate has been making gains around 0.8098.
Downside risks continued to weigh on the Pound (GBP) on Wednesday morning, while the Euro (EUR) shrugged off the impact of some less-than-impressive Eurozone data.
Pound Sterling (GBP) Trends Lower with Worries over UK Economy
While March’s UK Services and Composite PMIs both bettered expectations they failed to bolster Pound Sterling (GBP) yesterday. Even though the service sector demonstrated a strong uptick from 52.7 to 53.7, investors remain concerned over the growth outlook of the domestic economy. Expectations are for the UK’s GDP to have slowed in the first quarter, in spite of this improvement, with worries over the impact of a potential ‘Brexit’ adding downwards momentum to economic growth.
Despite the finalised raft of Eurozone Services PMIs showing a general downwards revision the Euro (EUR) remained on stronger form thanks to safe-haven demand. Markets were also encouraged by an unexpected improvement in February’s Eurozone Retail Sales, which strengthened from 2.0% to 2.4% on the year. Suggestions that consumer demand was growing increased confidence in the relative strength of currency union.
Weaker Eurozone Retail PMI Fails to Dent EUR/GBP Exchange Rate Uptrend
Although Germany Industrial Production was found to have fallen by less than forecast in February, edging down from 1.8% to 1.3% on the year, the single currency has weakened somewhat this morning. This reassuring data has been contrasted by a disappointing Eurozone Retail PMI, which showed that the retail sector had fallen into contraction territory in March. The index dropped to a two-month low of 49.2, as strong German growth was counteracted by severe slumps in France and Italy.
Meanwhile, with UK Business Secretary Sajid Javid in Mumbai to discuss the timeframe of Tata Steel’s withdrawal from its UK assets, the fate of the domestic steel industry continues to weigh on Pound Sterling sentiment. Even though there are signs of interested buyers, the speed at which Tata may wish to divest itself of its loss-making operations could prove detrimental. As such the appeal of the Pound remains muted today.
EUR/GBP Exchange Rate Forecast: German & UK Trade Balances Predicted to Provoke Volatility
Ahead of the weekend the Euro to Pound Sterling (EUR/GBP) exchange rate could make further gains if the latest German Trade Balance reveals a widening of the country’s trade surplus. Signs of strength within the Eurozone’s powerhouse economy are likely to decrease the odds of the European Central Bank (ECB) being prompted to loosen monetary policy further in the near future. If Fed Chair Janet Yellen also proves dovish in comments on Thursday evening the Euro could be pushed higher across the board.
With the UK’s industrial and manufacturing production forecast to have slowed on the year in February Sterling could well fall further out of favour with investors. However, if February’s visible trade deficit is found to have narrowed somewhat in spite of unfavourable market conditions the Pound could see some improvement on Friday.
Current EUR, GBP Exchange Rates
At the time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was trending narrowly around 0.8043, while the Pound Sterling to Euro (GBP/EUR) pairing was ceding ground in the region of 1.2433.