- Pound (GBP) Recovers on Trade Figures – April deficit better-than-expected
- Euro (EUR) Slips Despite Solid German Trade – German bond yields near record lows
- Update: UK Construction Output Impresses – Plus consumer inflation expectations rise
- Update: Final May German CPI Released – Matches preliminary figures
- Forecast: May UK CPI Next Week – Will it distract from ‘Brexit’ rows?
GBP/EUR Falls on Friday as ‘Brexit’ Jitters Take Hold
The Pound to Euro exchange rate slipped closer to the week’s lows on Friday, as the day’s positive UK data was unable to improve Sterling sentiment.
With the EU referendum vote now under two weeks away, the Pound’s volatility has soared, making it an increasingly risky currency to invest in.
Next week is set to be the final full trade week before the EU Referendum on the 23rd of June. Will Pound investors react to the UK’s upcoming data, or will ‘Brexit’ fluctuations rule Sterling’s movement?
GBP/EUR trended in the region of 1.2700 on Friday afternoon, with the Pound falling across the board as European markets drew to a close, despite solid UK data all week.
(Previously updated 13:56 10/06/16)
GBP/EUR Exchange Rate Down From Highs Ahead of UK CPI Data
After hitting a high of 1.2881 earlier in the week, the GBP/EUR exchange rate edged slightly lower as the weekend approached.
Although the UK’s Construction Output report exceeded forecasts on Friday, demand for the Pound remained muted.
Next week’s UK CPI data may spark GBP volatility if the results differ from forecasts.
(Previously updated 10:30 10/06/2016)
The Pound Sterling to Euro (GBP/EUR) exchange rate has fluctuated throughout the week as ‘Brexit’ concerns dominated movement and left the volatile Pound struggling. The Euro has remained relatively sturdy, but slipped on Thursday on mixed Eurozone news.
Before the close of Thursday’s European session, GBP/EUR was up 0.4% and trended in the region of 1.2770. The pair has remained close to the week’s opening levels of 1.2770 for much of the week – but could it end in the Pound’s favour despite ‘Brexit’ fears?
Whether or not Sterling is able to end the week on a bit of a high largely depends on the UK’s upcoming construction output report. Declining output may keep the Pound under pressure heading into the weekend.
Pound (GBP) Attempts Recovery Despite ‘Brexit’ Concerns
The Pound’s movements throughout the week have been thoroughly mixed and unpredictable. With the historic EU referendum now only a fortnight away, Sterling volatility remains at multi-year highs.
Monday’s session saw the Pound plummet across the board after new polls revealed a strengthened lead for the referendum’s ‘Leave’ campaign. On Tuesday, the currency recovered in response to a poll that saw the ‘Remain’ camp with a slight lead.
GBP/EUR has continued to fluctuate despite largely optimistic data released on Wednesday and Thursday. Wednesday’s factory output data was highly positive, and Thursday’s trade report revealed that the key UK deficit had lightened more than expected.
The overall trade deficit narrowed from a revised -£3.532b to -£3.294b, while the goods trade balance improved from a revised -£10.646b to -£10.526b despite being predicted to score -£11.200b. IHS Global Insight Chief UK Economist Howard Archer stated the following about the figures;
‘Along with the jump in industrial production in April and decent retail sales growth, the trade data suggest that UK GDP growth could be holding up better in the second quarter than has been thought, despite the heightened uncertainty’
The Pound may have also been strengthened by news that an increasing amount of politicians were coming out in support of the ‘Remain’ campaign, with ex UK Prime Ministers Tony Blair and John Major being the latest to join forces to deliver a warning over the ramifications of a ‘Brexit’.
Euro (EUR) Slips as German Bond Yields Fall
The Euro has remained relatively sturdy throughout the week despite Sterling’s hefty fluctuations, but the shared currency began to weaken on Thursday despite mostly solid German trade data.
The latest German trade surplus figures came in at 25.6b, despite being predicted to fall from 26.2b to 21.3b, and German exports printed a stagnation of 0.0% despite a forecast plummet from 1.9% to -0.9%. However, the Euro struggled to hold its ground.
A recovering US Dollar is one of the primary reasons the Euro lost its footing on Thursday. The Euro had previously been widely favoured to the US Dollar as investors sold the ‘Greenback’ following abysmal US labour figures last week. However, as the US Dollar regained its strength, investors returned from the Euro.
News that German bond (or ‘bund’) yields had reached near-record-lows on Thursday also weighed on the Euro’s appeal. Reuters reports;
‘The 10-year German Bund yield, the benchmark for borrowing costs in the euro area, fell 1.3 basis points at 0.043 percent and was close to Wednesday’s record low at 0.035 percent.
An attempt to break through zero into negative territory may well be on the cards, say analysts, adding that uncertainty ahead of the June 23 referendum on Britain’s membership of the European Union could provide the trigger for such a move.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: What Next for Sterling?
With the EU referendum vote now only a fortnight away, investors seem increasingly hesitant to prioritise British economic news when deciding whether or not to move on the Pound.
As a result, any key news in the ongoing ‘Brexit’ debates are certain to cause the most influence in GBP/EUR before the end of the week, as they have done for most of the week up until now.
Failing that however, the Pound could instead move on relatively influential data due for release. April’s construction output report is expected to worsen from -4.5% to -4.9% year-on-year, but is projected to improve month-on-month. A consumer inflation expectations report is also due.
Eurozone data, on the other hand, has the potential to be influential if the final May German Consumer Price Index (CPI) scores deviate from preliminary figures. The results are expected to meet preliminary scores of 0.3% month-on-month, and 0.1% year-on-year.
Looking ahead, next week could be a hectic one for the Pound as May’s British CPI report will be released on Tuesday, followed by the Bank of England’s (BoE) final pre-referendum meeting on Thursday.