Crucial German Vote on Bailout Deal Begins, GBP/EUR Unaffected as Yet
The Bundestag has now begun to debate the Greek bailout this morning with the general expectation remaining that the vote will ultimately be in favour of the deal. It would appear, however, that the common currency (EUR) will have to wait until a positive result is confirmed before experiencing any significant boost on optimism. Currently the Pound (GPB) remains dominant, with the GBP/EUR exchange rate currently at 1.1485.
Further Eurozone Votes in Favour of Greek Bailout Fail to Dent GBP/EUR
Austria and Spain have both fallen in line with many of their Eurozone colleagues today to back the bailout of Greece. In spite of this, however, the GBP/EUR exchange rate has maintained a strong uptrend, currently at 1.4198.
A strong showing in the UK Consumer Price Index drove the GBP/EUR exchange rate higher today.
Lower Eurozone GDP Undercut Euro Encouragement on Greek Bailout Approval
Following last week’s less than impressive UK employment data, a moderately positive showing on Construction Output saw the Pound (GBP) regain some ground ahead of the weekend. Although output fell short of forecast, printing at 2.6% rather than 3.3%, it still saw a slight rise on the previous month’s figure. After a period of sluggishness and poor data for Sterling this offered some limited encouragement to propel the GBP/EUR exchange rate upwards.
Fridays’ crucial event for the Euro (EUR) was the meeting of Eurozone finance ministers to discuss the current Greek bailout plan, with any potential hold-ups at this stage boding very ill for the European Central Bank (ECB) repayment deadline on the 20th August and the fate of the common currency as a whole. Ultimately, in spite of previous reticence by both the German and Finnish ministers, the proposal was approved with the way cleared for it to progress through the various European parliaments this week.
Nevertheless, the Eurozone’s GDP figures, published on the same day were quite mixed, with France stagnant, further contraction for Finland and minimal growth in Germany. Together this caused the overall composite to fall short of the anticipated figure of 1.3% to instead clock in at 1.2%. With investors cautious ahead of the ECB deadline, this pulled down the Euro to boost the GBP/EUR pairing to 1.4088.
UK CPI Rises to Rally Pound and Buoy GBP/EUR Pairing
Yesterday saw the Greek deal approved by both the Latvian and Lithuanian parliaments, with further votes taking place today in Spain, Estonia and Austria. Single currency sentiment appears to be cautiously optimistic at this juncture, with little else in the way of economic data set to influence the Euro today.
After a sharp surge in value for Sterling in the wake of comments from Monetary Policy Committee (MPC) member Kristin Forbes on Monday the GBP/EUR pairing ultimately lost ground, to enter a downtrend around 1.4094. Whilst Forbes’ suggestions that an interest rate rise for the UK would be better coming sooner rather than later provoked some hawkish trading, the lack of economic data or support for her statements soon pared back this initial excitement.
This morning’s UK Consumer Price Index, however, has given the Pound a strong rally, with a better than expected result of 0.1% over a continued neutral reading of 0%. Indicating that inflation did increase on the previous month in July this data must necessarily raise hopes of a sooner take off for Bank of England (BoE) interest rates. On the strength of this renewed optimism the GBP/EUR exchange rate has now jumped into a distinct uptrend.
GBP/EUR Exchange Rate Forecast: ECB Payment Deadline Key to Euro Movement
Ahead of Thursday’s ECB deadline the Euro will be primarily influenced by the progress of the bailout. Although the greatest obstacle to final approval and the disbursement of funds to Greece remains the sceptical Bundestag the anticipation is for an approval. Chancellor Angela Merkel is likely to experience a revolt from party members but the numbers are still expected to be enough to pass the deal.
Retail Sales figures for the UK will be released on Thursday, potentially offering a further boost to the Pound should they prove to be as expected or better. Stronger sales would certainly encourage continued faith in the current state of the nation’s economy, with a shortfall possibly undoing the bullish work of today’s Consumer Price Index.
Current GBP, EUR Exchange Rates
At time of writing the Pound Sterling to Euro (GBP/EUR) exchange rate is trending up at 1.4153, with the Euro to Pound Sterling (EUR/GBP) pairing falling around 0.7065.