GBP/EUR, GBP/USD Exchange Rates Forecast to Hold Decline as UK Construction Dips
An unexpectedly steep decline in the UK’s Construction PMI saw both the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates decline during the European session.
Demand for Sterling eased after the report was issued and the British asset is likely to hold declines ahead of tonight’s televised debate between the seven biggest political parties in the UK.
Political uncertainty is weighing heavily on the Pound and if today’s discussion between major party leaders only add to concerns, the Pound may extend declines into the Easter weekend.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3693
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in the region of 1.4804
After advancing on Tuesday in response to better-than-anticipated UK growth and consumer confidence data, both the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates declined as the week progressed and political concerns undermined demand for the Pound.
Pound Sterling to Euro (GBP/EUR) Exchange Rate News: UK Political Uncertainty Sees Sterling Soften
Over the course of the European session, the Pound Sterling to Euro (GBP/EUR) exchange rate dropped back below 1.38 as fears of a hung parliament overshadowed positive UK ecostats.
The Pound had previously posted widespread gains as the GfK gauge of consumer sentiment achieved a 12-year high and the pace of UK fourth quarter growth was shown to have been stronger on both the quarter and the year than anticipated.
However, even an improvement in the UK’s Markit Manufacturing PMI wasn’t enough to prevent the Pound from tumbling against 12 of its 16 major currency counterparts.
The UK’s manufacturing index advanced from 54.0 to 54.4, prompting this response from economist Vicky Redwood; ‘The sector’s recovery is picking up pace. Encouragingly, the new export orders balance rose to its highest level in seven months, suggesting that the recent rise in the Pound is not acting as too big a constraint for now.’
As the May election looms, the polls are showing no clear winner, with neither of the top two rankings parties securing enough support for a majority vote, and the prospect of political upheaval is successfully putting investors off the Pound.
The Pound Sterling to Euro (GBP/EUR) exchange rate hit a high of 1.3770
Sterling slipped to a low of 1.3698 against the Euro, with positive economic data for the Eurozone adding to the GBP/EUR downtrend.
The final manufacturing PMIs for the Eurozone and its largest economies for March were positively revised, indicating that the fiscal strategies introduced by the European Central Bank (ECB) are having the desired effect.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate News: Sterling Fails to Capitalise on Below-Forecast US Employment/Manufacturing Data
The Pound also spent much of Wednesday trending lower against the US Dollar.
As stated by industry expert Neil Jones; ‘The manufacturing data was encouraging but Pound-Dollar was dragged down by general US Dollar demand. Currencies do not like political uncertainty. There is no clear leader and I sense genuine concern from investors regarding certain political configurations.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate hit a high of 1.4872
The Pound was able to pare declines however as US employment and manufacturing reports failed to impress.
The US ADP Employment Change data (usually viewed as a good precursor to the Non-Farm Payrolls figures) showed that the US economy added fewer-than-forecast positions in March.
Similarly, the ISM Manufacturing gauge, which is given greater weighting than its Markit equivalent, eased from 52.9 to 51.5 instead of printing at the more encouraging 52.5.
As the reports add to the case against the Federal Reserve increasing interest rates in June, the US Dollar broadly softened after the figures were published.
Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: UK Construction Data, US Factory Orders Ahead
Economic reports from the Eurozone are in short supply tomorrow so fluctuations in the Pound Sterling to Euro (GBP/EUR) exchange rate will probably caused by the day’s solitary UK publication – Construction PMI.
Although the UK construction sector contributes comparatively little to total GDP, the report will be of interest and a surprising increase in the index could lend Sterling support.
The Pound Sterling to US Dollar (GBP/USD) exchange rate, meanwhile, may recoup recent losses if the run of US reports (including initial jobless/continuing claims/factory orders figures) fall short of forecasts.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trading in the region of 0.7260, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.4829, the US Dollar to Pound Sterling (USD/GBP) exchange rate was trading in the region of 0.6741, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3769