The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -1.30% on Wednesday afternoon.
British Pound (GBP) Exchange Rate Forecast to Hold Losses against the Single Currency (EUR) as Pace of UK Hiring Slows
Tuesday’s disappointing manufacturing data has weighed heavily on demand for the British asset. The slower-than-expected pace of British Manufacturing Production was largely due to an overvalued Pound and dampened demand for British exports in Europe. The fact that the high value of Sterling has had such a detrimental impact on British factory output has caused many futures traders to pare bets as to the timing of a Bank of England (BoE) interest rate hike given that policy tightening tends to lead to a stronger domestic currency.
The Pound also softened on Wednesday after a report from the Recruitment and Employment Confederation (REC) and accountants KPMG showed the pace of hiring in the UK slowed in June. The near-two year low pace of hiring has been linked to a lack of skilled candidates. ‘Recruiters are struggling to fill vacancies for everything from software engineers to sales,’ Bernard Brown, a partner at KPMG, said.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3861.
Euro (EUR) Exchange Rate Forecast to Strengthen against the British Pound (GBP) after Greece Given Extension to Submit Reforms
Having given Greece just hours to prepare and submit reforms following the ‘no’ victory in the Greek austerity referendum, the Eurogroup extended the deadline until Sunday. This has eased pressure on Geek officials to produce comprehensive reforms and accordingly increased optimism that the measures put forward will be accepted. Should Greece fail to secure a deal by Sunday, however, the likelihood of financial collapse is extreme.
The European Central Bank (ECB) will judge whether it is suitable to continue providing Greek banks with Emergency Liquidity Assistance (ELA) today. They have already stretched their own rules to have provided ELA for such a long time, especially when it is difficult to argue the case that Greek banks are solvent. Most traders are certain that the ECB will pull ELA if Greece cannot secure aid by Sunday.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3951 today.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold below 1.41 ahead of ECB Decision
Given that the Greek financial system has been so dependent on the ECB’s ELA, the decision as to whether or not to maintain the current level will be of significance. However, given that Greece has been given until Sunday to submit proposals the ECB are likely to follow suit. Therefore, the Pound Sterling to Euro (GBP/EUR) exchange rate will probably hold below 1.41 unless the ECB shock the markets by withdrawing ELA from Greece.
Although domestic data has not been particularly impactful on the GBP/EUR exchange rate of late with geopolitics dominating trader focus, the Bank of England interest rate decision will be of significance on Thursday; although most traders expect the central bank to hold rates at this juncture.
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.4058 today.