Pound Sterling to Euro (GBP/EUR) Exchange Rate Within Touching Distance of 1.44
The ECB opted to leave fiscal policy unchanged on Thursday and implied that quantitative easing will continue for at least another year.
At the same time, BoE Governor Mark Carney implied that UK borrowing costs could rise before the close of 2015 and this divergence in policy outlook helped the Pound Sterling to Euro (GBP/EUR) exchange rate advance to an over seven and a half year high.
If next week’s BoE meeting minutes show that policy makers were split on the subject of interest rate revisions at the last policy meeting, the GBP/EUR exchange rate has the potential to climb above eight-year highs.
GBP/EUR Trends at 1.42 before ECB Decision
The Pound Sterling to Euro (GBP/EUR) exchange rate held its earlier gains in spite of Greek PMs voting to accept the controversial raft of bailout conditions late last night.
The social unrest inspired by the decision kept the Euro under pressure ahead of today’s interest rate announcement from the European Central Bank (ECB).
Bank of America Merrill Lynch had this to say of the decision; ‘The ECB would use any argument to support its dovish message. While the ECB would prefer to wait, we believe the market needs the central bank to push it the ‘correct’ way. Thus we would not be surprised to see strong verbal intervention, and reinforcement of forward guidance, throughout the summer. In the absence of market reaction to this, we think the ECB would step up action in September. We would expect the ECB’s dovish tone to be negative for the Euro, but should not have a sustained impact.’
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4315
As rioters marched on the Greek parliament and threw petrol bombs at police, the Pound Sterling to Euro (GBP/EUR) exchange rate neared the 1.43 level.
Pound Sterling to Euro (GBP/EUR) Exchange Rate News: Pound Declines after UK Unemployment Rate Climbs, But Wage Growth Hits 5-Year High
The Pound Sterling to Euro (GBP/EUR) exchange rate briefly declined on Wednesday as the UK’s employment data for the three months through May failed to live up to expectations.
With the economy losing jobs in the period rather than gaining the 35,000 expected, the unemployment rate advanced from 5.5% to 5.6%.
This disappointment pushed the Pound lower, but the British currency quickly recouped losses as investors focused on the fact that average earnings achieved a five-year high.
Positive comments relating to the jobs data included this remark from Citi economist Michael Saunders; ‘The slowdown in job growth seems to be partly a reflection of reduced labour supply and reduced inflows into self-employment and part-time work, rather than lower demand for staff at firms. The number of vacancies remains very high, and surveys suggest that firms are finding it harder to find suitably skilled staff.’
While the GBP/EUR currency pair did dip below 1.42 after the report was published it swiftly bounced back to previous highs.
Euro to Pound Sterling (EUR/GBP) and US Dollar (EUR/USD) Exchange Rates Forecast to Fall as Greek Protests and Grexit Fears Spark Risk Aversion
The rebound in the Pound Sterling to Euro (GBP/EUR) exchange rate was also due to the social unrest in Greece.
As the nation’s parliament debated the austerity measures put forward by creditors, the public took to the streets to express their anger over the demands being made.
The International Business Times noted; ‘Protests turned violent in Athens on Wednesday, as Greece faced a crucial vote that would decide whether the country would accept reforms, and ultimately, the country’s future in the Eurozone. A demonstration erupted in chaos as petrol bombs were let off in front of the Greek Parliament and police tear-gassed the crowd. Demonstrators threw rocks and Molotovs in Syntagma Square in the center of Athens, sending people fleeing through the smog of tear gas.’
Whether the nation’s parliament supports or rejects the austerity measures, the tide is turning in Greece and the future for the nation remains uncertain.
The Euro to Pound Sterling (EUR/GBP) and Euro to US Dollar (EUR/USD) exchange rates both dropped as the situation developed.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: 2016 UK Interest Rate Hike Speculation, ECB and Greece in Focus
Any further references to UK interest rates being increased in 2016 in the days leading up to the publication of the minutes from the Monetary Policy Committee’s recent gathering will lend the Pound support and help the currency achieve fresh highs against peers like the Euro (GBP/EUR), Canadian Dollar (GBP/CAD) and Australian Dollar (GBP/AUD).
Thursday’s European Central Bank (ECB) policy meeting will also impact GBP/EUR trading in the hours ahead. If the central bank indicates that the situation in Greece is likely to impact economic growth in the currency bloc and impact fiscal policy, the Euro is likely to post further losses.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4282 the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.6995