The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a limited range on Friday afternoon.
In response to a Bank of England (BoE) report which showed that consumer inflation expectations rose in May, the Pound advanced versus many of its closest currency rivals. The appreciation has been somewhat sluggish, however, thanks to a separate report which showed the pace of UK hiring slowed in May.
The Euro, meanwhile, softened after Greece opted to defer its €300 International Monetary Fund (IMF) payment. Athens decided to bundle all of June’s payments into one payment at the end of the month. However, many feel that the Hellenic nation is likely to default on such a large payment. These fears were exacerbated after it was reported that Greek Prime Minister Alexis Tsipras and Russian President Vladimir Putin had a lengthy conversation.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3729.
Pound Sterling (GBP) Exchange Rate Forecast to Hold against the Common Currency on UK Inflation Expectations
The BoE/GfK Inflation Expectation for the next 12 months increased from 1.9% to 2.2% in May despite the recent dip into deflation. This was particularly surprising given that a recent report by polling company YouGov for Citi showed Britons’ expectations for inflation over the next 12 months eased to 1.0% in May. ‘Expectations have been on a falling trajectory since 2013 and if this ends up being a turning point then the BoE will feel more comfortable raising rates when the time comes,’ George Buckley, an economist at Deutsche Bank, said.
The Pound’s gains have been relatively slow moving, however, thanks to a report from KPMG and the Recruitment and Employment Confederation (REC) which showed the pace of hiring in the UK slowed in May. ‘The public sector continues to suffer, with pay growth rising by just 0.2% in the last reported quarter.’
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3582 today.
Euro (EUR) Exchange Rate Forecast to Trend within Narrow Range against British Asset after Greece Defers IMF Payment
Deferring on the IMF payment was both a surprising and unusual move and was initially greeted with enthusiasm, as evidenced by a short-lived Euro rally. However, many now feel that this is just delaying the inevitable and the Hellenic nation will default on the bundled payment due at the end of June. Ambrose Evans-Pritchard points out that Greece is the first developed nation ever to miss an IMF payment, stating; ‘The skipped payment is the clearest sign to date that the crisis is escalating to a dangerous level as Syriza refuses to buckle. It will not be resolved without European statesmanship of a high order, so far lacking. While the authorities sought to play down the Greek decision, it was clearly intended as a warning shot. Syriza had the money at hand. It chose not to pay as a conscious political choice.’
The single currency softened further after a report surfaced that Tspiras and Putin have resumed talks. ‘Practical steps were discussed to implement agreements reached during the recent working visit of Alexis Tsipras to Russia, particularly the planned construction of the gas transport infrastructure across the territory of Turkey and Greece,’ the Kremlin’s press service said.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Steady on Lack of Data
Given the absence of further domestic data publications to provoke changes, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to continue trending within a tight range for the remainder of Friday’s European session. With that being said, any developments from the Hellenic nation are likely to cause volatility.
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.3751 today.