The Pound Sterling to Euro (GBP/EUR) exchange rate advanced in Friday’s European trading ahead of Eurozone Industrial Production data, while the Pound Sterling to US Dollar remained in a tight range and the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate jumped as political uncertainty from the recent general election weighed on the Lira.
There’s doubt as to whether Turkey will have a coalition government, with many parties not willing to join the AKP.
Turkish Prime Minister Ahmet Davutoglu stated: ‘We’ve used the coalition era of the 1970s and 1990s as an example to show that coalitions are not suitable for Turkey and we still stand by that stance.’
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed on Thursday, while the Pound Sterling to US Dollar (GBP/USD) and Pound Sterling to Turkish Lira (GBP/TRY) exchange rates slumped after Turkey’s current account deficit shrank and US Advance Retail Sales data fell in line with forecasts.
The US Advance Retail Sales stat came in at 1.2% in May in line with forecasts offering the US Dollar (USD) exchange rate some support against other majors. Meanwhile, the Turkish current account deficit shrank in April from -$4.96B to -$3.41B.
Capital Economics representative William Jackson commented: ‘The current account deficit remains the key weakness in the economy, making it particularly vulnerable amid the current political uncertainty and in the run-up to Fed tightening. The deficit continues to be funded by portfolio inflows into the equity and bond markets, as well as borrowing from foreign banks. These tend to be relatively volatile.’
Earlier… The Pound Sterling to Euro (GBP/EUR) exchange rate and the Pound Sterling to US Dollar (GBP/USD) exchange rates were both trending higher in Wednesday’s European trading, while the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate softened after upbeat Turkish Gross Domestic Product (GDP) Growth Rate stats.
Thursday morning saw the Pound Sterling to Euro (GBP/EUR) exchange rate remain in a tight range, while the Pound Sterling to US Dollar (GBP/USD) exchange rate dropped and the Pound Sterling to Turkish Lira (GBP/TRY) exchange rate climbed.
Hopes for a Greek deal in the near future rose on Thursday but was unable to buoy the Euro (EUR) significantly.
Optimism appears in #Greece talks — some officials see a good chance of a deal next week
— Jan Strupczewski (@reutersJanS) June 11, 2015
However, as the session progressed European Council President Donald Tusk warned that the plug would be pulled on Greek negotiations if no deal was made soon.
— Peter Spiegel (@SpiegelPeter) June 11, 2015
The UK’s RICS House Price Balance came in at 34% in May after the previous month’s 32%. Economists had forecast a 36% figure.
UK Industrial Production Offers Pound Sterling (GBP) Exchange Rate Support
The Pound (GBP) exchange rate was offered some support on Wednesday when the UK’s Industrial Production ecostat jumped from 0.7% to 1.2% on the year in April, rather than falling to 0.6% as forecast. The rise has been accredited to a rise in mining and quarrying sectors, which had recorded 5.6% growth.
Meanwhile, the UK’s Manufacturing Production ecostat slipped below forecasts from 1.1% to only 0.2% in April on the year. Predictions had been for a drop to 0.4%.
Later in the session the UK’s NIESR Gross Domestic Product (GDP) Estimate will be released which could cause some significant Pound Sterling (GBP) exchange rate movement.
The Pound Sterling to Euro (GBP/EUR) exchange rate is trending at 1.3686 with +0.43% market movement.
The Pound Sterling to Turkish Lira (GBP/TRY) exchange rate is trending in the region of 4.2308 with -0.27% market movement.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trending in the region of 1.5460 with +0.47% market movement.
Turkish Lira (TRY) Exchange Rate Forecast to Stabilise after Turkish GDP Growth Rate
Meanwhile, the Turkish Lira was able to climb against other major currencies when Turkish GDP Growth Rate data printed above forecasts. Economists had expected a fall from 2.6% to 1.7% on the year in Q1; however, the actual ecostat came in at 2.3%.
The main influence for the Turkish Lira (TRY) this week has been the general election, which saw Turkish voters curb the influence of President Recep Tayyip Erdogan.
It appears as if many political parties aren’t willing to form a coalition government, which has caused some doubts over the fate of the Turkish powers as well as pressuring the Lira (TRY) exchange rate lower.
Berenberg Bank economist Wolf-Fabian Hungerland commented: ‘The election result adds major political uncertainty to an already toxic mix of a weakening economy, rising inflation despite low oil prices, a growing number of street protests, abrading political checks and balances, and attacks on the independence of the central bank.’
Central Bank of the Republic of Turkey (TCMB) Supports Lira (TRY) Exchange Rate after Election Tumble
The Central Bank of the Republic of Turkey (TCMB) attempted to support the tumbling Lira (TRY) exchange rate (which registered a 3.0% fall versus the Pound [GBP] and 5.0% against the US Dollar [USD]) as political uncertainty played havoc with the currency.
The TCMB cut its one-week foreign reserve currency deposit rates for US Dollars (USD) and Euros (EUR) by 0.5%. Following the central bank’s announcement the Turkish Lira (TRY) exchange rate was trending 4.0% softer against the US Dollar (USD).
The Turkish Lira to US Dollar (TRY/USD) exchange rate is trending in the region of 0.3653.
The Turkish Lira to Pound Sterling (TRY/GBP) exchange rate is trending in the region of 0.2364.
The Turkish Lira to Euro (TRY/EUR) exchange rate is trending at 0.3222.
US Dollar (USD) Exchange Rate Forecast to Fluctuate on Account of Federal Reserve and US Advance Retail Sales Ecostat
Meanwhile, the US Dollar (USD) exchange rate has been trending lower as investors fear policymakers and lawmakers may be uncomfortable with the strength of the rallying ‘Greenback’. The US Dollar (USD) has been strengthening on account of speculation that the Federal Reserve will be in a position to hike interest rates in the near future. Additionally, the Federal Open Market Committee (FOMC) meeting next week could cause some major fluctuations in the US Dollar (USD) exchange rate.
The Bank of America Merrill Lynch commented on the prospect of Federal Reserve interest rate hikes, saying: ‘While Fed policy action next week looks implausible, the FOMC meeting will feature a press conference as well as updated economic and rate projections. Fed officials have at times fought to downplay the importance of changes in their rate projections, but the relevance of the Fed’s near-term forecasts is clearly increasing as liftoff approaches.’
The US Advance Retail Sales stat will be out on Thursday and is forecast to be a major influence on the US Dollar (USD) exchange rate.
The US Dollar to Pound Sterling (USD/GBP) exchange rate is trending in the region of 0.6473 with -0.40% market movement.
The US Dollar to Euro (USD/EUR) exchange rate is trending in the region of 0.8847 with market movement of -0.11%.
The US Dollar to Turkish Lira (USD/TRY) exchange rate is trending in the region of 2.7316.
Euro (EUR) Exchange Rate Forecast: Greece Situation Continues Precariously
The Euro (EUR) exchange rate is also expected to have a choppy week of trading with negotiations between Greece and its creditors continuing.
Angela Merkel’s CDU party member Michael Fuchs cast doubt on the situation by saying: ‘I hope a deal can be reached. But it is fully and only on Greece’s side. We want Greece to stay in the Euro. It is out wish and will… but the need to come up with serious proposals, and what they are coming up with now is not serious at all.’
— EU Council TV News (@EUCouncilTVNews) June 10, 2015
The Euro to US Dollar (EUR/USD) exchange rate is trending in the region of 1.305 with +0.06% market movement.
The Euro to Turkish Lira (EUR/TRY) exchange rate is trending in the region of 3.0925.
The Euro to Pound Sterling (EUR/GBP) exchange rate is trending in the region of 0.7316 with -0.35% market movement.