The Pound Sterling to Euro (GBP/EUR) exchange rate was trading lower on Thursday while the Pound Sterling to US Dollar (GBP/USD) exchange rate climbed higher.
However, the Euro to Pound Sterling (EUR/GBP) exchange rate may become vulnerable on the premise of another hurdle in Greek negotiations. French finance minister Michel Sapin has just warned that reform plans from Greece need much more work and suggested that rapid progress needs to be made.
UPDATE: European Central Bank (ECB) boarmember and Bundesbank President Jens Weidmann has also thrown in his two cents on the Greece situation and warned that the nation is running out of time.
Weidmann also commented on the ECB’s role, saying: ‘It is ultimately politicians, not the central bank, who decide who’s in the currency union and who isn’t. Even though many people would like to offload this responsibility on central banks, it is not up to us.’
The Pound Sterling to Euro (GBP/EUR) exchange rate remained softer in Wednesday’s late trading while the Pound Sterling to US Dollar (GBP/USD) exchange rate recouped losses and began trending higher after US ADP Employment Change and ISM Manufacturing figures slipped.
The US ADP Employment Chaneg figure came in at 189K in March rather than the 225K forecaast. February had also printed below predictions at only 212K, but March’s reading recorded the largest miss in the past four years. The ecostat is used by investors to gauge Friday’s Change in Non-Farm Payrolls and Unemployment Rate figures and can therefore bode badly for the US Dollar if negative.
The ISM Manufacturing index fell from 52.9 to 51.5 in March, another bad omen for the US Dollar exchange rate.
The Pound Sterling to Euro (GBP/EUR) exchange rate continued to trade lower in the second half of Wednesday’s European session after ONS productivity statistics, while the Pound Sterling to US Dollar (GBP/AUD) exchange rate softened ahead of US ISM Manufacturing data.
Earlier… The Pound Sterling to Euro (GBP/EUR) exchange rate was trading softly on Wednesday despite an upbeat Markit UK Manufacturing Purchasing Managers Index (PMI), while the Pound Sterling to US Dollar (GBP/USD) exchange rate was also trending lower before US ISM Manufacturing data.
The Pound Sterling to Euro (GBP/EUR) exchange rate initially held steady after final Italian, French, German and Eurozone Manufacturing PMI printed above forecasts, showing the currency bloc’s manufacturing productivity had picked up.
Germany, renowned powerhouse of the 19-nation area, recorded 52.8 instead of the 52.4 originally predicted, while the Eurozone as a whole reached 52.2 instead of 51.9. Moreover, the Eurozone ecostat hit a 10-month high as a result of the European Central Bank’s (ECB) quantitative easing programme, which began at the start of March.
Markit chief economist Chris Williamson stated: ‘The final PMI reading signalled slightly stronger growth of the manufacturing economy than the preliminary reading, adding further signs that the Eurozone economy is reviving after last year’s slowdown.’
Meanwhile, the US Dollar to Pound Sterling (USD/GBP) exchange rate had an interesting day of trading on Tuesday when a mixed bag of US ecostats was released. The US Dollar to Euro (USD/EUR) exchange rate had been offered some support from ongoing uncertainty between Greece and its creditors.
US Consumer Confidence had rocketed from a positively revised 98.8 (previously 96.4), to 101.3 in March—an upbeat development for those questioning whether the US was undergoing an economic slowdown.
Economist Joel Naroff stated: ‘Rising confidence and home prices adds to the belief that the first quarter slowdown will be temporary.’
However, the USD/GBP currency pair slipped on Tuesday when the Chicago Federal Reserve Purchasing Managers Index failed to rebound as economists had expected. The index remained below the 50.0 benchmark which separates expansion from contraction, recording the second month of negative growth.
The March ecostat rose lethargically from 45.8 to 46.3; economists had forecast a much more favourable jump to 51.8.
Pound Sterling to Euro (GBP/EUR), US Dollar (GBP/USD) Exchange Rate Forecast
The Pound Sterling to Euro (GBP/EUR) exchange rate is likely to continue fluctuating on the outcome of negotiations between Greece and Eurozone financial heads. Many economists had written off a deal before Easter with very little progress being made in talks thus far and the nation verging on running out of funds.
However, the Greek government seems to have different ideas, instead suggesting that a deal will be made by the 12th April.
Economy minister George Stathakis commented: ‘The agreement will close on (Greek Orthodox) Easter week.’
Euro to Pound Sterling (EUR/GBP) and Euro to US Dollar (EUR/USD) Exchange Rates Sensitive to Grexit Developments
However, investors are eyeing a meeting next week between Greece and Russia and some experts have suggested that Greece could turn to Russia for financial aid if a Eurozone deal can’t be made—an event that would lead to the much feared Greek exit (Grexit).
The Euro to Pound Sterling (EUR/GBP) and Euro to US Dollar (EUR/USD) exchange rates are likely to be extremely sensitive to these developments.
US Dollar to Pound Sterling (USD/GBP) and Euro (USD/EUR) Exchange Rates to Fluctuate on ISM Manufacturing and Non-Farm Payrolls
Meanwhile, the Pound Sterling to US Dollar (GBP/USD) exchange rate is likely to fluctuate significantly on US data out later in the session such as the highly influential US ISM Manufacturing index. The manufacturing sector is expected to have recorded a decline in March from 52.9 to 52.5 and is an event which could pressure the USD/EUR and USD/GBP exchange rates lower.
Additionally, Markit’s US Manufacturing PMI, MBA Mortgage Applications and ADP Employment Change ecostats will also be out and could influence US Dollar movement. The Employment Change figure will be scrutinised by investors for indications as to whether Friday’s US Change in Non-Farm Payrolls and Unemployment Rate numbers will be favourable.
One aspect of the UK economy that performed well in March was the manufacturing sector; Markit’s Manufacturing PMI showed an increase from 54.0 to 54.4, in line with forecasts and hitting an eight-month high. Therefore the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates could be offered some support throughout the rest of Wednesday’s session.
Eight-month high for UK manufacturing purchasing managers’ index counters some of those slowdown fears: http://t.co/16fY2GkFMk
— David Smith (@dsmitheconomics) April 1, 2015
However, UK productivity fell by 0.2% in quarter four of 2014 according to the National Office of Statistics which means the UK is still less productive than before the 2008 global financial crisis–a factor that’s expected to weigh heavily on the Pound.
The ONS stated: ‘The absence of productivity growth in the seven years since 2007 is unprecedented in the post-war period.’
We’re no more productive (q4 2014) than we were in 2007 (ONS): “the absence of productivity growth…is unprecedented in the post-war period
— Andrew Verity (@andyverity) April 1, 2015
US Federal Reserve officials are also scheduled to talk today which could impact USD/EUR and USD/GBP trading.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading at 1.4828; the Pound Sterling to Euro (GBP/EUR) exchange rate is trending in the region of 1.3642.