Newsflash – UK Inflation Returns to 0.1%, GBP/EUR Rallies to 1.39
The Pound Sterling to Euro (GBP/EUR) exchange rate got over its earlier weakness and surged to 1.39 against the Euro as the pace of UK Consumer Price gains rose from -0.1% to 0.1% in May.
Further GBP/EUR gains could be recorded tomorrow if the UK’s employment report comes in at forecast levels.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3905
Newsflash – Pound Slightly Softer, UK Inflation Data Ahead
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3803 on Tuesday as investors waited for the UK’s inflation data to be published.
Economists are expecting the UK to have emerged from deflation and if that proves to be the case the Pound is likely to advance across the board.
A GBP/EUR uptrend would be aided by the ZEW economic sentiment surveys for Germany and the Eurozone showing the declines expected.
Newsflash – GBP/EUR Trending at 1.3822 before UK CPI, Greek Talks Break Down
At the start of the European session the Pound was holding previous gains against the Euro as investors assessed the latest developments, or lack thereof, in the Greek bailout negotiations.
The European Commission asserted on Sunday that the latest round of talks in Brussels had broken down in less than an hour.
The official message was; ‘While some progress was made, the talks did not succeed as there remains a significant gap. On this basis, further discussion will now have to take place in the Eurogroup.’
Later in the European session the Eurozone’s trade balance figures showed that the region’s surplus widened by more-than-expected in April. However, the report failed to lend the struggling Euro much support.
Tomorrow’s UK inflation data and ZEW sentiment surveys are likely to initiate considerable GBP/EUR movement during the European session.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3823
Next week the Pound Sterling to Euro (GBP/EUR) exchange rate could advance to 1.39 if the UK’s latest inflation data confirms that the nation emerged from deflation in May.
Pound Sterling to Euro (GBP/EUR) Exchange Rate News: Pound Rallies to One-Month High as IMF Withdraw Negotiators from Greece, UK GDP Revised
Over the course of this week the Pound Sterling to (GBP/EUR) exchange rate advanced from a low of 1.3540 to strike a high of 1.3880. The pairing closed out the week trending at 1.3818.
While the Pound was supported by encouraging Industrial Production data and an upward revision to UK GDP, the Euro was pressured lower by a further deterioration in the relationship between Greece and its creditors.
On Friday the UK’s annual Construction Output data printed more strongly-than-anticipated, but the Pound’s gains were stymied by hints that the UK’s credit rating could be at risk.
According to major ratings agency Standards & Poor’s, the UK’s top level credit rating could be put at risk if the in-out EU referendum promised by the Conservative government goes ahead.
S&P’s asserted; ‘The decision to propose a referendum, with all the economic risks that such a decision entails, was at least partly driven by the government’s intention to contain the influence of the Euro-skeptic UK Independence Party. We also believe that the referendum is aimed at strengthening unity inside the Conservative Party, which has a strong Euro-skeptic wing.’
In the months ahead, referendum concerns are likely to act as a headwind to UK growth and the Pound’s performance.
Euro to Pound Sterling (EUR/GBP) Exchange Rate News: Forecasts for Greek Default/Grexit May Drive the Euro Lower, but ZEW Sentiment Data Could Lend Support
The negotiations between Greece and its creditors have been dragging on for months and for every step forward the nation takes, there seems to be a sudden sprint backwards.
This week the news that the International Monetary Fund (IMF) withdrew its negotiators in frustration at the lack of progress weighed heavily on the Euro and pushed the common currency lower against a number of its peers.
It was also reported that Germany now sees a Greek exit from the Eurozone as a possibility.
As stated by Bloomberg; ‘With time running out to close a deal, the German government has begun planning for a Greek default […] If you’re waiting for a clear resolution to the country’s status in the 19-nation monetary union, you may wait a long time. Adopting the euro was always supposed to be a one-way ticket, so there is no legal precedent or political roadmap for an exit. Next steps for Greece range from retaining the euro to catastrophic divorce. Half-measures are also on the cards, such as having multiple currencies circulate, with aid recycled to repay foreign-currency debts.’
If forecasts for a Grexit continue, additional Euro losses are likely.
That being said, the common currency could be supported by the publication of positive ecostats for the Eurozone.
Of this week’s releases, the ZEW economic sentiment surveys for Germany and the Eurozone are likely to have the most impact on the Euro. Increasing confidence may give the common currency a boost.
UK Inflation, Retail Sales and Employment Data Forecast to Drive Pound Sterling to Euro (GBP/EUR) Exchange Rate Movement this Week, but Greece Remains in Focus
Given that the UK is set to release some highly influential ecostats over the course of last week, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to experience some notable movement.
The data with the most potential to initiate GBP/EUR volatility is the UK’s Consumer Price Index (CPI). In April, the UK’s CPI edged into deflation territory, printing at -0.1% on the year.
Economists have forecast that UK inflation increased by 0.2% on the month in May, taking the annual figure back up to 0.1%.
If inflation does increase it would support the comments made by the Bank of England (BoE) about the UK’s dip into deflation being temporary and keep the central bank on track to make interest rate adjustments in the first quarter or second quarter of 2016.
Core CPI is expected to advance from 0.8% to 1.0%.
Given the links the BoE has previously made between the strength of the UK labour market and interest rate revisions, the nation’s latest employment figures will also be of considerable interest.
Strong employment growth or rising wages would be Pound-supportive.
Similarly, if the UK’s retail sales data reveals an uptick in consumer spending, the Pound Sterling to Euro (GBP/EUR) exchange rate could push higher over the course of the week.
We could see the GBP/EUR currency pair jump above 1.39 before the weekend, especially if the odds of a Grexit rise further.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3818 and the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7236