The Pound Sterling to Euro (GBP/EUR) exchange rate dived by around -0.67% on Wednesday morning.
With mounting positive sentiment towards the European Central Bank (ECB) after the launch of quantitative easing, the shared currency strengthened versus the majority of its most traded currency rivals.
The Pound Sterling, conversely, softened versus most of its major peers after domestic data printed disappointingly. Unemployment remained unchanged and wages dropped which will add pressure on the conservatives as they campaign to remain in office.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3829.
Yesterday…
The Pound Sterling to Euro (GBP/EUR) exchange rate declined by around -0.77% on Tuesday morning.
With a distinct absence of domestic data to provoke movement, the Pound softened versus most of its major peers on Tuesday. The decline can be attributed to ongoing trader unease with the general election fast approaching. With several political parties offering an EU referendum, political uncertainties have caused a dramatic drop in demand for the British asset.
After European Central Bank (ECB) President Mario Draghi made a speech which expounded the positives already seen at this early stage of quantitative easing, the common currency advanced versus many of its major peers. Tuesday has seen a continuation of the Euro appreciation after domestic data printed positively, on the whole.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3912.
Pound Sterling (GBP) Exchange Rate Ticks Lower on Political Uncertainty
As mentioned above, the forthcoming British general election is causing significantly dampened demand for the British asset. Many expect this general election to be the most closely fought in modern political history, and the potential for a Brexit from the European Union is heightened with several parties offering a referendum should they gain victory.
In addition to political uncertainty weighing on demand, recent comments from Bank of England (BoE) officials have heightened negative sentiment. After seemingly backtracking from reassurances that deflation was only temporary and unlikely to affect rate decisions, the Pound has lost nearly all of the gains made from a string of positive domestic data results.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3900 today.
Euro (EUR) Exchange Rate Gains on Positive Reaction to QE
Given that many expected the ECB to fail to source the requisite bonds to finance quantitative easing in the Eurozone, the shared currency strengthened after the launch went without a hitch. The Euro continued its advance after President Draghi stated that QE was already having a positive effect on the economy in this early stage.
The shared currency saw additional gains on Tuesday after mixed domestic data erred towards the positive. Of particular note were positive results from ZEW data. The ZEW Eurozone Sentiment Index came in at 62.4 in March, eclipsing the median market forecast of a rise from 52.7 to 54.94. The ZEW German Economic Sentiment index came in at 54.8 in March, bettering the previous figure of 53.0 but failing to meet with the market consensus of a rise to 56.69.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Losses
With a distinct lack of domestic data to curb the trend, and with continued damp sentiment towards the British asset amid political unknowns, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to continue trending lower over the course of Tuesday’s trade.
Wednesday is likely to see greater GBP/EUR volatility with several influential British data publications due. Labour market data and minutes from the most recent BoE policy meeting will be of most interest to those invested in the Pound.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.4044.
