The Pound Sterling to Euro (GBP/EUR) exchange rate weakened to its lowest level in a month on Tuesday as sentiment towards the UK currency was knocked by growing worries over the implications of a possible British exit from the European Union.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the range of 1.3530 – 1.3602
Sterling remained weaker against the Euro and other major peers even as a report showed that the UK’s trade deficit narrowed to its lowest level in more than a year in April. The positive report suggests that the deficit will be less of a drag on second quarter GDP than had been previously forecast.
According to the London based Office for National Statistics (ONS), the UK’s trade deficit narrowed to £1.2 billion in April, the figure was the lowest seen since March 2014. The goods trade deficit narrowed from £10.7 billion to £8.5 billion. The report added that UK exports increased by 4.8% in April, the biggest rise since September 2014.
‘Monthly trade figures are notoriously volatile but today’s significant improvement is nonetheless very welcome, but there is no room for any complacency. The longer-term trend still shows a worsening in the trade position in recent months. It is clear that we are not making enough, sustained progress in closing the trade gap,’ said David Kern, the chief economist at the British Chambers of Commerce.
Despite the positive trade figures the Pound remains under pressure. On Monday the Confederation of British Industry (CBI) cut its UK growth forecasts and today, the British Retail Consortium warned that UK retail sales stagnated in May.
Uncertainty over the European referendum was also playing its part on keeping the Pound down against the Euro and most major peers. A number of businesses have warned against a British exit, but others have said that the UK has nothing to fear from leaving adding to the uncertainty. In the long term we can expect sentiment towards the Pound to remain under pressure as the referendum debate heats up. No date for the vote has been announced yet.
Eurozone GDP and Greece Optimism Supports Euro (EUR) Exchange Rate
The Euro found support from a report which confirmed that the Eurozone economy expanded by 0.4% in the first quarter of the year. The growth figure means that single currency bloc’s economy expanded at a faster pace than both the UK (0.3%) and the US (-0.2%) in the first three months of 2015.
‘Among member states for which data are available for the first quarter of 2015, the Czech Republic (+3.1%), Cyprus and Romania (both +1.6%) recorded the highest growth compared with the previous quarter, followed by Poland (+1.0%), Bulgaria and Spain (both +0.9%), Hungary, Slovenia and Slovakia (all +0.8%). Decreases were registered in Lithuania (-0.6%), Estonia (-0.3%) Greece (-0.2%) and Finland (-0.1%),’ said Eurostat.
After news broke that Athens delivered new economic reform proposals to the European Commission, optimism that a deal will soon be reached between Greece and its international creditors increased and supported the Euro.
The Pound Sterling to Turkish Lira was trading in the region of 4.1993 – 4.2377
The Turkish Lira inched higher against the Pound but remains close to record low levels against both it and other major currencies. The Lira’s sharp declines came after Turkish election result battered the currency lower.
Turkey faces weeks of political uncertainty after the ruling AK party failed to win enough support to form a majority government.
Parties will now try to form a coalition, if they do not succeed than a return to the polls is likely.