The Pound Sterling to Euro (GBP/EUR) exchange rate dived by nearly 1.0% on Wednesday afternoon.
After British ecostats failed to meet with forecast figures, the Pound softened versus many of its currency competitors. Of particular disappointment was the Services PMI given that the services sector accounts for over three-quarters of British Gross Domestic Product.
The shared currency, meanwhile, advanced versus its most traded currency competitors after the European Central Bank (ECB) left rates on hold and reiterated the importance of seeing through the full course of quantitative easing. Geopolitical tensions in Greece haven’t been enough to drag the common currency down.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3620.
Pound Sterling (GBP) Exchange Rate Forecast to Soften against the Shared Currency as Services Growth Misses Estimates
British economic data failed to meet with forecast figures on Wednesday, which caused the Pound to slump. Nationwide House Prices, BRC Shop Prices and the Markit Services PMI all failed to meet with their respective market consensuses. Of particular disappointment was the Services PMI which saw stunted growth of 56.5 in May.
David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, stated; ‘Momentum in the sector stalled in May, with the drop in the headline index the biggest fall for almost four years and likely to cause concern as services remains the UK’s largest driver of economic growth. However, the index still retained its position in positive territory and was higher than its long-term average, as survey respondents reported strong growth in new business for the twenty-ninth month running and continued to expand staffing levels.’
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3605 today.
Euro (EUR) Exchange Rate Forecast to Rally versus the British Asset despite Greek Deadlines
Although Greece is rapidly approaching deadlines for International Monetary Fund (IMF) repayments which won’t be made unless the nation secures financial aid from creditors, the shared currency strengthened as many economists feel Greek woes have been well and truly priced-in.
European data printed relatively positively, which aided the single currency uptrend. However, the main contributing factor towards Euro appreciation was the press conference from ECB President Mario Draghi after policymakers kept the benchmark lending rate on hold. Draghi reaffirmed the bank’s stance on continuing with the whole Quantitative Easing (QE) program. Draghi also stated that deflationary concerns have now passed.
‘The risk of deflation is definitely gone, but inflation is unlikely to move back to 2% for the foreseeable future,’ UniCredit economist Marco Valli said. ‘The reason why we do not expect the ECB to halt its QE purchases before its current intention is that we expect this to require an increase in core inflation and we still believe the ECB is too optimistic on its outlook for core inflation,’ Danske Bank said. ‘However, fixed income markets would be very sensitive to an expected tapering discussion at the end of this year.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Losses on Absence of Data
Given the complete lack of further domestic data publications to initiate changes, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to hold losses for the remainder of Wednesday’s European session.
There is heightened potential for GBP/EUR volatility on Thursday with the Bank of England set to make its interest rate decision. European data may also impact upon the pairing, although proceedings in Greece are likely to dominate trader focus.
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.3785 today.