Newsflash: Greece Avoids Default, German Factory Orders Increase
The Pound Sterling to Euro (GBP/EUR) exchange rate fell by more than 0.8% on Friday as investors reacted to the news that Greece has deferred its next debt repayment to the International Monetary Fund (IMF) until the end of the month.
It is hoped that the Hellenic nation will use this time to reach an accord with its creditors and avoid being expelled from the Eurozone.
Another factor lending the Euro support this morning was Germany’s Factory Output data.
Factory Output in the Eurozone’s largest economy was shown to have increased by 1.4% on the month and 0.4% on the year, defying expectations for respective figures of 0.5% and -0.6%.
The GBP/EUR currency pair is likely to experience additional movement before the weekend as the BoE publishes its latest inflation report.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3582
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5321
Pound Trending Higher against Euro and US Dollar before BoE Inflation Report
The Pound prepared to close out the European session trending in a slightly stronger position against the US Dollar and Euro as investors looked ahead to Friday and the publication of the BoE’s inflation report.
If the BoE signals that the rate of UK inflation may accelerate more rapidly than previously expected the Pound could end the week on a high.
That being said, the Eurozone’s first quarter growth data will also be impacting demand for GBP/EUR while GBP/USD may slide if the US Non-Farm Payrolls report impresses.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3619
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5356
Newsflash: Greece Rejects Creditor’s Proposal, French Unemployment Falls
The Pound Sterling to Euro (GBP/EUR) exchange rate advanced back above the 1.36 level on Thursday as Greece rejected the ‘take it or leave it’ bailout proposal presented by its creditors.
According to reports, Greece has issued a counter offer. If the Greek outline is accepted, the Pound could fall back to its almost month low against the Euro.
This morning’s ecostats for the Eurozone have been mixed, with French unemployment easing and German Construction Output falling.
The level of joblessness in France drifted from from 10.4% in the forth quarter of last year to 10.3% in the first quarter of 2015. An increase to 10.7% had been expected.
Meanwhile, Germany’s Construction PMI dropped to a four-month low of 50.8.
Today’s Bank of England’s (BoE) interest rate decision is unlikely to have much impact on either GBP/EUR or GBP/USD trading given that the central bank isn’t expected to make any adjustments to fiscal policy, but the US Initial Jobless/Continuing Claims figures could impact ‘Cable’.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3614
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5329
In a day of significant market volatility, the Pound Sterling to Euro (GBP/EUR) exchange rate plummeted to 1.35 in response to positive Eurozone data, Greek bailout progress and the ECB interest rate announcement; meanwhile the Pound Sterling to US Dollar (GBP/USD) exchange rate recovered from its 1.5249 low following the publication of mixed US ecostats.
Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) Exchange Rate News: Pound Declines as UK Services Sector Growth Contracts and Puts BoE Interest Rate Hike in Doubt
Early in the European session the UK’s sub-par Markit Services PMI saw both the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates register declines.
The Pound had previously softened against the Euro as a result of improved Greek bailout hopes and disappointing UK shop price and house price data.
These losses were exacerbated as the UK’s Services PMI moved from 59.5 in April to 56.5 in May – a far lower result than the reading of 59.2 anticipated and a number which puts the prospect of a 2015 interest rate adjustment from the Bank of England (BoE) in jeopardy.
Markit economist Chris Williamson’s accompanying statement contained both positives and negatives. While he highlighted the spread in weakness from the Construction and Manufacturing sectors, and intimated that the data implies the UK economy expanded by just 0.4% last month, he also stated that a rebound in output and rising inflation could still push the BoE into raising borrowing costs this year.
Similarly, David Noble of the Chartered Institute of Procurement and Supply commented; ‘The effect of pre-election uncertainty was largely dissipated. The sector retained a good level of activity and faced slightly raised input prices for fuel and commodities, some of which were passed on to consumers as the threat of deflation receded somewhat.’
However, given the largely disappointing nature of this week’s UK reports, tomorrow’s BoE interest rate decision may not see the division among policymakers some industry experts were hoping for.
The minutes from recent policy meetings have shown that for two members of the Monetary Policy Committee the decision of whether or not to increase interest rates was ‘finely balanced’ – but it’s unlikely this week’s PMI reports will push them to the hawkish side of the fence.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast – Euro Surges by 1% against Pound as Eurozone Unemployment Eases, Consumer Spending Rises and ECB Dismisses Deflation Concerns
Over the course of the European session the Euro jumped by more than 1% against its British peer, with the Pound Sterling to Euro (GBP/EUR) exchange rate falling to a low of 1.3587.
The negotiations between Greece and its creditors have entered a crucial phase, but that didn’t prevent the Euro from benefiting from the publication of upbeat ecostats for the currency bloc.
While economists had expected the level of unemployment in the Eurozone to ease to 11.2% from 11.3%, joblessness actually fell to 11.1%.
The rate of consumer spending in the region also exceeded projections, with retail sales rising 0.7% on the month and 2.2% on the year.
Cementing the Euro’s gains were European Central Bank (ECB) President Mario Draghi’s comments on the declining deflation risks facing the currency bloc.
As predicted, the ECB left fiscal policy completely unchanged at its latest gathering.
The Euro to Pound Sterling (EUR/GBP) exchange rate achieved a high of 0.7358
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast – US Employment Improves, Trade Deficit Narrows, but Services Growth Eases
After falling early in the European session, the Pound Sterling to US Dollar (GBP/USD) exchange rate recouped losses as the day progressed and the US published mixed ecostats.
While the US Trade Deficit was shown to have narrowed by more-than-expected, and the ADP Employment Change report revealed a sturdy rate of jobs growth, the two major measures of the US services sector both fell short.
The US ISM Non-Manufacturing Composite Index printed at 55.7, down from 57.8 in April and a much lower May result than the 57.0 anticipated, while the Markit Services PMI eased from 56.4 to 56.2 when no change had been projected.
The Markit US Services PMI report stated; ‘At 56.2 in May, the seasonally adjusted Markit US Services Business Activity Index posted above the neutral 50.0 value for the nineteenth consecutive month. However, the latest reading was down from 57.4 in April and pointed to the slowest pace of expansion since the opening month of 2015. Mirroring the trend for business activity, service providers signalled the least marked upturn in new work for four months in May.’
As any disappointing US ecostats reduce the odds of the Federal Reserve adjusting borrowing costs in September, the data saw the US Dollar soften against several of its peers.
The Pound Sterling to US Dollar (GBP/USD) exchange rate hit a high of 1.5375
Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: BoE Interest Rate Decision/Inflation Report, Greek Debt Deadline and US Non-Farm Payrolls Report Ahead
Tomorrow the Pound could experience modest movement as a result of the Bank of England’s interest rate decision (although the central bank is expected to leave policy unaltered) but investors with an interest in the GBP/EUR and GBP/USD exchange rates are more likely to be looking ahead to Friday.
At the close of the week the Bank of England’s inflation report, the US Non-Farm Payrolls employment numbers and the Greek reaction to its IMF debt repayment will all be major currency-market movers.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trading in the region of 0.7343, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5342, the US Dollar to Pound Sterling (USD/GBP) exchange rate was trading in the region of 0.6518, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3616