Pound Sterling to Euro (GBP/EUR) Exchange Rate Sinks to Fourteen-Month Low Today
After hitting a fourteen-month low of 1.2604 earlier this morning the Pound Sterling to Euro (GBP/EUR) exchange rate has begun to recover somewhat. Hopes are not high for today’s UK GDP figures, however, with a weaker showing likely to push the currency pair to a fresh low.
Demand for the Pound (GBP) has continued to slide on Wednesday, while weaker German economic data has failed to prevent the Euro (EUR) from making fresh gains against its softened rival.
Pound Sterling (GBP) Exchange Rate Trends Lower on Downside Risks of ‘Brexit’
With the date set for a June EU membership referendum Pound Sterling (GBP) has seen a severe bout of turbulence so far this week, with uncertainty over the outcome of the vote weighing heavily on sentiment. As the odds of a potential ‘Brexit’ edged higher, in the wake of London Mayor Boris Johnson’s decision to campaign for the ‘Leave’ vote, the Pound Sterling to Euro (GBP/EUR) exchange rate slumped sharply.
Comments from Bank of England (BoE) Governor Mark Carney equally discouraged confidence in the Pound, as the policymaker noted that investors were likely to continue protecting themselves against further Sterling volatility. With pundits less willing to buy into the currency on account of the ‘Brexit’ risk, and economic activity expected to be similarly hampered by uncertainty going forward, the outlook of the GBP/EUR exchange rate remains decidedly muted.
Despite the January BBA Loans for House Purchase showing a stronger-than-expected uptick in lending to home owners this morning the Pound has stayed out of favour with traders.
Chances of ECB Easing Increase after German Business Sentiment Slumps to Weaken Euro (EUR)
However, the Euro (EUR) has been struggling to take particularly strong advantage of the Pound’s current softness after Monday’s major gains. Confidence in the economic health of the Eurozone has been dented by a succession of discouraging data, as German figures in particular show fresh signs of slowness. German exports in the fourth quarter were found to have contracted further than forecast yesterday, while the IFO Business Sentiment Survey reported its lowest level in a year.
With the Eurozone’s powerhouse economy starting to experience greater drag from negative global headwinds, the likelihood of the European Central Bank (ECB) being prompted into action in March has continued to mount. As markets have already priced in the impact of fresh quantitative easing ECB President Mario Draghi may yet struggle to deliver substantial enough measures to weaken the single currency and adequately support Eurozone growth.
GBP/EUR Exchange Rate Forecast: UK GDP Report Predicted to Add Momentum to Pound Downtrend
The Pound will be hoping to recover some of its recent losses tomorrow on the back of the UK’s fourth quarter GDP report. However, as forecasts point to slightly more muted growth of 1.9% rather than the initial 2.1% estimate this may ultimately see Sterling shed further value. Given the damaging nature of the current ‘Brexit’ debate any signs of weaker economic growth are likely to discourage investors and push the GBP/EUR exchange rate lower.
Should the latest German GfK Consumer Confidence Survey demonstrate a continued weakening of domestic sentiment, the Euro may still struggle to capitalise on any additional Pound bearishness on Thursday.
Current GBP, EUR Exchange Rates
At the time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending lower at 1.2679, while the Euro to Pound Sterling (EUR/GBP) pairing was making gains in the region of 0.7886.