GBP/EUR Down 0.4%, Greek Deal Ahead?
Although UK data showed a narrowing in the nation’s trade deficit in April, the Pound remained trending lower against the Euro on Tuesday.
The GBP/EUR pairing softened amid growing concerns that a possible ‘Brexit’ could have a detrimental impact on the UK economy.
Reports that Greece is adopting a more accommodating approach with its creditors also supported the Euro.
Developments in the Greek negotiations will be the main source of additional GBP/EUR movement as the day progresses.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3536
German Industrial Production Increases, Euro Gains Despite Ongoing Greek Woes
A disintegration in the relationship between Greece and its creditors over the weekend failed to prevent the Euro gaining on Monday in reaction to encouraging German data.
The Pound Sterling to Euro (GBP/EUR) exchange rate fell to a low of 1.3666 after German Industrial Production was shown to have increased by 0.9% on the month and 1.4% on the year, beating forecast gains of 0.6% and 0.9%.
The German trade surplus also swelled by more-than-anticipated thanks to a 1.9% jump in exports in April. Exports had been expected to fall by a seasonally adjusted -0.4% month-on-month.
Although the Eurozone Sentix Investor Confidence gauge fell by more-than-anticipated, the fact that the Confederation of British Industry (CBI) cut its UK growth projections for both this year and next kept the Pound trending lower.
Moody’s ratings agency also warned that Brexit concerns could damage the UK’s Credit Rating.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3655
This week the Pound Sterling to Euro (GBP/EUR) exchange rate could extend recent declines, and fall back below 1.37, if the UK’s upcoming GDP figure fails to impress.
Pound Sterling to Euro (GBP/EUR) Exchange Rate News – Pound Ends Week Lower after Poor UK Services PMI Reduces BoE Interest Rate Bets
The Pound Sterling to Euro (GBP/EUR) exchange rate began last week trending in the region of 1.3983 but fell back to the 1.37 level by Friday as a result of below-forecast UK Services and Manufacturing data.
The lacklustre reports signaled that UK economic output may have remained slow in the first quarter and led investors to speculate that the Bank of England (BoE) will leave borrowing costs unchanged until next year.
Although the Markit Construction PMI impressed, construction output accounts for such a small percentage of total growth the data did little to support the Pound.
Friday’s BoE Inflation Expectation report did lend the Pound a little support, in that it showed consumers believe inflation will accelerate more rapidly than previously anticipated in the next 12 months, but positive German Factory Orders data and Greek developments limited gains.
Euro to Pound Sterling (EUR/GBP) Exchange Rate News – Common Currency Supported as Greek PM Says Bailout Deal is Close, German GDP Forecasts Increased
On Friday it was reported that Greece opted to defer its 300 million Euro repayment to the International Monetary Fund (IMF) until the end of the month – preventing a default and giving the Hellenic nation longer to negotiate with its creditors.
The development reduced the odds of a ‘Grexit’, for the time being at least, and lent the Euro support.
Although Greece rejected the bailout proposal put forward by its creditors, with Greek Prime Minister Alexis Tsipras deeming its contents an ‘unpleasant’ surprise, he has since inferred that an agreement is close to being reached.
Tsipras stated; ‘The Greek government cannot consent to unreasonable proposals that call for devastating measures for pensioners and Greek families. I want to believe that it was a bad negotiating trick and will be withdrawn. [But Greece is] closer to a deal than ever before. I’m sure that in the coming days our realistic and consistent position will be vindicated.’
Greece needs to make a deal quickly in order to meet the hefty debt repayment due at the end of the month, so the market will continue to fluctuate in response to the latest developments.
Further Euro gains were accrued at the close of the week due to positively revised growth forecasts for Germany.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate News – ‘Cable’ Slides after US Employment Data Ups the Odds of a September Federal Reserve Rate Hike
The Pound Sterling to US Dollar (GBP/USD) exchange rate tumbled on Friday afternoon as the US Non-Farm Payrolls report exceeded estimates and supported hopes for a rate adjustment from the Federal Reserve by the end of the summer.
While the jobs data for April was negatively revised, May saw the US economy add 280,000 positions, considerably more than anticipated.
Economist Guy Berger noted; ‘The most consistent message from policy makers this week is that they’re still data dependent, and we got one pretty big piece of data today, and that solidifies the chances for a September rate hike’.
If this week’s US ecostats (most notably the Advance Retail Sales and University of Michigan Confidence Index) print well, the Pound could fall further against the US Dollar over the next five days.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast – UK Growth Data, Eurozone Confidence Index, Greek Negotiations in Focus
As stated above, the Greek negotiations will continue to impact the direction taken by the Pound Sterling to Euro (GBP/EUR) exchange rate in the week ahead.
In the view of one industry expert; ‘Tsipras has his back against the wall. If a deal is not reached next week, in time for parliamentary approval of the deal, we are staring at disorderly default, deposit withdrawals, capital controls, and social unrest. I think a deal is in the making.’
Further movement in the pairing is likely to occur in response to ecostats from the UK and Eurozone.
The main UK figures to be aware of include the nation’s trade balance numbers, latest growth estimate, Manufacturing/Industrial Production data and Construction Output figures.
A widening in the UK trade deficit or a slowing in growth would weigh on the Pound.
A GDP figure of 0.4% or lower may see Sterling fall.
The Eurozone ecostats to focus on include the Sentix Investor Sentiment Index, German Trade Balance and Industrial Production figures and Eurozone Industrial Production numbers.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3737 and the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7279