- Pound (GBP) Falls on ‘Brexit’ Polls Last Week– Despite generally positive PMI
- Euro (EUR) Flounders on ECB News– But Euro strengthens on US Dollar woes
- Update: ‘Brexit’ Debates Drive Sterling– UK economic calendar quiet
- Forecast: Q1 Eurozone GDP on Tuesday– Final May German CPI on Friday
Pound Rebounds from 1.26 to 1.28 Today
During the Australasian session the Pound spiked against peers like the Euro despite a lack of data to support the move.
The British currency had previously tumbled in response to polls showing an increasing lead for the ‘Leave’ camp in the EU Referendum campaign.
The Pound Sterling to Euro (GBP/EUR) exchange rate advanced 0.4% as the European session got underway to trade in the region of 1.2775 before eventually pushing beyond 1.28 in spite of better-than-forecast Eurozone growth data.
Sterling was also left trending higher against the US Dollar and New Zealand Dollar.
Whether or not the Pound is able to extend gains as the week progresses largely depends on tomorrow’s UK Industrial/Manufacturing Production reports.
If the rate of output provides cause for concern, the Pound could trim its recent gains against the Euro. Conversely, better-than-expected results could be GBP supportive.
(Previously updated 17:30 06/06/2016)
GBP Recovers Slightly as Market Focuses on Fed
The Pound to Euro exchange rate was able to lighten its losses slightly on Monday afternoon as the foreign exchange market briefly turned its attention away from ‘Brexit’ debates and towards the US economy.
Fed Chairwoman Yellen is expected to speak on Monday evening, and could influence the Euro’s movement if her comments cause the US Dollar to recover – or plummet further.
(Previously updated 14:50 6/06/16)
GBP/EUR Extends Declines on New ‘Brexit’ Polls
As Monday’s European session continued and the Eurozone published better-than-forecast sentiment data. the Pound Sterling to Euro (GBP/EUR) exchange rate fell to a low of 1.2647.
With the Pound currently ten cents lower than it was against the Euro at the start of the year, further declines could take Sterling to fresh multi-year lows.
(Previously updated 10:48 06/06/2016)
The Pound extended its losses on Monday morning as a new set of EU Referendum polls revealed that last week’s shift towards ‘Leave’ had increased week-on-week.
A new online poll released by The Guardian indicated that 43% of those asked would vote to ‘Leave’, while 40% would vote to ‘Remain’.
Other poll results released by YouGov and ICM also indicated that support for the ‘Leave’ campaign had strengthened in the last week, due to increased immigration rhetoric.
This is a turnaround from two weeks ago when the ‘Remain’ camp appeared to have the most support. The switch in sentiment has seen the Pound lose as much as 6 cents.
(Previously updated 08:30 6/06/16)
The Pound Sterling to Euro (GBP/EUR) exchange rate plummeted during last week’s session as ‘Brexit’ bets weighed on the Pound, with Sterling’s attempted recoveries failing due to a weak US Dollar boosting the Euro.
Falling from a three-month-high of around 1.32, GBP/EUR lost around 280 pips throughout the week. The pair was down around -0.4% on Friday and trended in the region of 1.2850 as the week drew to an end.
With less high-profile UK ecostats on the cards this week, news from the Eurozone and any ‘Brexit’ related comments are likely to have to most significant impact on GBP/EUR exchange rate trading.
As a new week of trading began, the Pound extended losses against the Euro, slumping to 1.27, as the latest poll results indicated that support for the ‘Leave’ campaign is increasing.
According to Bloomberg’s Garfield Reynolds: ‘With less than three weeks to the June 23 referendum, investors have been disconcerted as the ‘Leave’ campaign gains traction. The currency dropped as much as 1.1% to $1.4353 on Monday and was down against all 16 major peers, while one-month volatility surged to 21.34 percent, a level last seen in February 2009.’
With EU Referendum concerns dictating GBP movement, disappointing German factory orders data did little to limit GBP/EUR losses on Monday.
Pound (GBP) Remains Weak Despite Decent PMI Scores
Sterling plummeted across the board during last Tuesday and Wednesday’s trade session, proving that the hold of ‘Brexit’ debates was as strong as ever with less than a month until the EU referendum.
Polls released last week revealed that support for the EU referendum’s ‘Leave’ camp had strengthened considerably, due to the increase in migration rhetoric from ‘Leave’ campaigners.
Pound investors largely ignored the week’s set of May PMI releases, which generally confirmed that Britain’s economic sectors were healthier in May than in April.
Wednesday’s Manufacturing PMI report improved from 49.4 to 50.1, unexpectedly escaping contraction despite a projection of 49.6. Thursday’s Construction print proved to be the most disappointing of the set as it slipped to 51.2, undermining expectations of holding at 52.0.
Friday’s session saw the set completed as Markit released the UK’s key Services and Composite PMIs. As Services are Britain’s primary economic sector, the better-than-expected increase from 52.3 to 53.5 was positive.
The overall Composite PMI score beat expectations of 52.3 by improving from 51.9 to 53.0. However, as Pound remained pressured on ‘Brexit’ bets and was easily taken down further when the Euro strengthened on Friday afternoon.
Euro (EUR) Boosted as US Data Disappoints
Despite mixed Eurozone data being released throughout the week, the Euro strengthened on Friday as key US labour data came in well below expectations.
While the US unemployment rate dropped from 5.0% to 4.7%, this was due to a considerable drop in the amount of citizens looking for work. The change in Non-Farm Payrolls came in at a shockingly low 38k, and as a result June Fed rate hike bets were essentially off, causing the US Dollar to plummet.
Other relatively safe currencies like the Euro benefitted from the sudden drop in US Dollar appetite, as investors left the Dollar and bought into the shared currency for the time being.
The EUR/USD, EUR/GBP movement has been largely unrelated to domestic Eurozone news. Thursday’s European Central Bank (ECB) policy meeting and press conference disappointed investors by echoing April’s meeting and indicating little future activity.
The ECB left all key rates frozen as was widely expected, but the Euro struggled to maintain its strength after ECB President Mario Draghi’s updated CPI forecasts were still well below the 2.0% inflation forecast.
German growth forecasts were also cut on Friday. The Bundesbank announced that, in response to poor export demand, it now only expects German Gross Domestic Product (GDP) to be 1.7% in 2016, down from the previous forecast of 1.8%. The 2017 forecast was cut from 1.7% to 1.4%.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: ‘Brexit’ Could Continue to Drive Movement This Week
While Friday’s boost for the Euro was due to a change in Federal Reserve rate hike bets, the majority of GBP/EUR movement last week was due to a shift in ‘Remain’ and ‘Leave’ campaign strength, reflected in domestic polls.
These kinds of polls are likely to continue to influence GBP/EUR movement in the coming week, especially with the week’s British economic calendar set to be relatively light and the EU referendum now under three weeks away.
No key UK data is expected to be released until Wednesday’s session, which will see the release of industrial and manufacturing production reports, as well as NIESR’s May Gross Domestic Product (GDP) estimate.
The Euro, on the other hand, could continue to be influenced by movement in the US Dollar. With bets that the Federal Reserve could hike interest rates in June now considerably low, any hawkish statements from Fed policymakers could see Euro investors returning to the US Dollar.
Eurozone data is also expected to be relatively quiet. However, Tuesday’s Q1 GDP report could inspire Euro movement if it deviates considerably from preliminary figures and expectations.
With Euro movement relatively muted against the volatile Pound in recent weeks however, it’s likely that a shift in ‘Brexit’ campaign bets will see the Pound taking point in upcoming GBP/EUR shifts.