Pound Sterling to Euro (GBP/EUR) Exchange Rate Could Tumble on UK Election Concerns
The Pound Sterling to Euro (GBP/EUR) exchange rate predictably softened on the day of the UK general election as polls put the result as too close to call.
Although nothing will be known for certain until tomorrow, speculation surrounding the potential outcome is likely to continue dictating demand for the Pound in the hours ahead.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3386
GBP/EUR Exchange Rate Lower Despite Positive UK Services PMI, GBP/USD Gains on ADP Employment Flop
Early on Wednesday the Pound declined against the Euro as Greece met its latest debt payment and Services/Composite PMIs for some prominent Eurozone economies were positively revised.
The Pound failed to recoup losses even as the UK’s Services PMI rose to an eight-month high.
However, the Euro’s gains against its British peer were a little trimmed as the Eurozone released worse-than-expected retail sales figures.
Sales had been forecast to fall by -0.7% on the month in March, but they actually dropped -0.8%, taking the annual figure to 1.6%.
As trading progressed, the GBP/EUR exchange rate fell back to trading in the region of 1.3489, but the Pound Sterling to US Dollar (GBP/USD) exchange rate advanced following the publication of the US ADP Employment Change report.
The US economy was shown to have added 169,000 positions rather than the 200,000 expected by economists.
March’s figure was also negatively revised, putting further pressure on the US Dollar.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5227
GBP/USD Exchange Rate Advances as US Deficit Widens
The Pound Sterling to US Dollar (GBP/USD) exchange rate was able to advance by around 0.4% before the close of the European session as US data revealed an unexpected widening in the trade deficit of the world’s largest economy.
After the deficit was shown to have swelled from 35.9 billion Dollars to 51.4 billion Dollars the GBP/USD exchange rate briefly advanced beyond the 1.52 level.
However, with the influential ISM Non-Manufacturing Composite gauge showing surprising improvement, Pound gains were limited.
Tomorrow the main causes of movement in the GBP/EUR and GBP/USD exchange rates will be the UK’s Services/Composite PMIs, the Eurozone’s Retail Sales data and the US ADP Employment Change report.
The Pound Sterling to Euro (GBP/EUR) exchange rate is trading in the region of 1.3569 while the Pound Sterling to US Dollar (GBP/USD) exchange rate is trading in the region of 1.5178
GBP/EUR Exchange Rate Climbs 0.5%, GBP/USD Exchange Rate Trims Gains after UK Construction PMI
Although the Pound Sterling to Euro (GBP/EUR) exchange rate slumped to a low of 1.35 on Friday, the fact that Greece is still no closer to reaching an agreement with its creditors (coupled with Monday’s disappointing manufacturing data for France) saw the GBP/EUR pairing recoup 0.5% on Tuesday.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was also able to pare declines at the beginning of the week. However, a below-forecast UK Construction PMI saw the Pound trim gains as the European trading progressed.
The construction gauge had been expected to slip from 57.8 to 57.4 but it actually dropped to 54.2 in April.
In the days ahead UK general election speculation will be responsible for driving further Pound Sterling movement.
This morning the Eurozone’s Producer Price Index revealed a 0.2% month-on-month gain in March (less than the 0.3% increase expected) but posted a year-on-year figure of -2.3%, in line with forecasts.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3632 while the Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in the region of 1.5120
At the close of the week the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates recorded notable losses, shedding most of the gains accrued over the course of April, and we could see further declines in both pairings.
Pound Sterling to Euro (GBP/EUR) Exchange Rate News – GBP Slides to 1.35 as Eurozone Exits Deflation
The Pound Sterling to Euro (GBP/EUR) exchange rate briefly breached the 1.40 level earlier in the week as the Pound was supported by positive UK house price data and the previous week’s encouraging meeting minutes from the Bank of England (BoE)
However, with ecostats for the Eurozone showing that the region emerged from deflation in April, the Euro staged an impressive rebound before the weekend. The common currency advanced on the Pound and was trading in the region of a three-month high against the US Dollar.
The GBP/EUR exchange rate plummeted all the way back to the 1.35 level.
In the opinion of strategist Shaun Osborne; ‘The Euro has looked heavily oversold for a while. It has brought a much needed correction to the market.’
Pound Sterling to US Dollar (GBP/USD) Exchange Rate News – US Dollar Supported by Jobless Claims Data
A run of less-than-impressive US reports and some fairly dovish commentary from the Federal Reserve helped the Pound Sterling to US Dollar (GBP/USD) exchange rate rally all the way to a high of 1.5499 on Wednesday as investors pushed back rate hike expectations.
However, the pairing slumped back to 1.5133 after the US initial jobless claims report showed that the number of people applying for first-time unemployment benefits in the US fell to a 15-year low.
Some investors bet that this positive figure could mark a turning in the tide of US data, a development which would support the case in favour of the Fed adjusting borrowing costs this year.
An unexpected slide in the UK’s Manufacturing PMI, coupled with UK election concerns, compounded Sterling’s losses.
Even Friday’s below-forecast US ecostats failed to help the Pound return to trending anywhere near the week’s highs.
UK General Election Speculation Weighs on GBP/EUR, GBP/USD Exchange Rate Forecasts
While some of the Pound losses recorded at the close of the week were to do with the UK’s disappointing Markit Manufacturing PMI, a major cause of the declines in the GBP/EUR and GBP/USD exchange rates was speculation surrounding the outcome of the fast-approaching UK election.
In the view of industry expert Boby Michael; ‘Traders said it is not concerns about economic policies of the new government but worries related to the UK’s membership of the EU that have weighed down the UK currency in the penultimate week of the election. Conservatives have called for a referendum to decide the future of UK-EU relations and a win by that side will likely see a sharp slide in stocks and the currency […] fears are related to the continuity of the UK in the EU.’
However, according to foreign currency strategist Paul Meggyesi; “The Pound’s pre-election performance has been significantly more assured than we had expected, even allowing for the setback over the past few days [and that] begs the question of why investors appear to be getting more comfortable with the outcome of the election, even though there has been no material movement in the opinion polls throughout the entire campaign.’
So far opinion polls have only emphasised how tightly fought the election campaign has been, with most indicating that none of the major parties will secure enough of a majority to govern alone.
If the election results in a hung parliament, the resultant uncertainty would have a detrimental impact on British assets and the Pound will probably tumble against several of its most-traded currency counterparts.
Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast – UK Election Results, US Employment Data, Greek Negotiations in Focus
Given the number of high-profile events on the cards this week, we can expect considerable movement in both the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates.
While the race to Number 10 will be the driving force behind demand for Sterling, the UK’s Markit Construction, Services and Composite PMIs will also be of interest.
Friday’s Manufacturing PMI revealed a slowing in output in April, if the pace of growth in the Services and Construction sectors also eased, the reports will add to the downward pressures on the Pound.
Volatility in the GBP/EUR exchange rate may also occur as a result of the ongoing negotiations between Greece and its creditors. If it appears as though an accord will be reached, demand for the Euro could surge.
Meanwhile, investors with an interest in the GBP/USD exchange rate will be keeping an eye on Friday’s US Non-Farm Payrolls report. Should the labour market data impress and up the odds of the Fed returning to a hawkish bias with regards to interest rates, GBP/USD could fall back below 1.50.
On Sunday the Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3512, the Euro to Pound Sterling (EUR/GBP) exchange rate was trading in the region of 0.7395, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in the region of 1.5139 and the US Dollar to Pound Sterling exchange rate was trading in the region of 0.6605