- Pound (GBP) Weakness Continues– ‘Leave’ camp strength leaves Sterling floundering
- Decent UK PMI Ignored– Last week’s Services and Composite reports beat expectations
- Euro (EUR) Strengthened by US Dollar Struggles– Despite dull ECB statements
- Forecast: Final Q1 Eurozone GDP Today– Results better-than-estimated
GBP/EUR Back to 1.28 Today
The Pound Sterling to Euro exchange rate (GBP/EUR) exchange rate jumped 0.9% during the European session, achieving a high of 1.2899.
The pairing gained despite the Eurozone’s final first quarter growth data exceeding forecasts. GDP printed at 0.6% on the quarter, rather than the 0.5% previously estimated, and 1.7% on the year.
Other Eurozone data published today showed that industrial production in Germany increased by more than predicted.
The Pound could reverse gains against the Euro tomorrow however if the UK’s Industrial/Manufacturing reports detail a slowing in output.
NIESR’s GDP estimate may also have an impact on GBP/EUR trading.
(Previously updated 08:30 07/06/2016)
Pound Recoups Losses Ahead of Eurozone GDP
The Pound Sterling to Euro (GBP/EUR) exchange rate clawed back losses to trend just below 1.28 against the Euro ahead of the release of the Eurozone’s final growth estimate for the first quarter.
Sterling was also supported by some better-than-forecast domestic housing data.
In the hours ahead GBP/EUR may fluctuate if the Eurozone’s GDP data is revised from initial estimates.
As it stands, the Pound is trending in the region of 1.2774.
(Previously updated 17:05 06/06/2016)
GBP/EUR Fluctuates, ‘Remain’ Camp Ramps Up Arguments
The Pound was able to lighten some of its losses on Monday afternoon. With markets redirecting their focus towards the US Federal Reserve, the Euro’s strength waned slightly and the Pound was allowed to recover.
GBP/EUR remained well below the day’s opening levels however, trending in the region of 1.2725.
Sterling may also have bolstered its defences on news that the ‘Remain’ campaign were likely to ramp up its debates in the coming week.
Some analysts expect Prime Minister David Cameron to share a space with key opponents in the Labour party, in order to strengthen sentiment towards the ‘Remain’ camp.
It would take a notable turnaround in public opinion in order for Sterling to recover losses against peers like the Euro.
(Previously updated 14:41 6/06/16)
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped considerably last week despite mixed Eurozone news, as UK news and other global factors saw the Pound falling and the Euro strengthening.
GBP/EUR lost almost -400 pips during last week’s session, leaving this week’s opening levels at 1.2770. The pair fell an additional -0.5% on Monday morning as ‘Brexit’ concerns continued to rise and extended losses to fall all the way to 1.26.
With much of this week’s UK data being fairly low-profile, ‘Brexit’ related news is likely to be the driving force behind further Pound movement in the days ahead. That being said, Wednesday’s Industrial/Manufacturing production reports may have an impact on demand for Sterling.
Pound (GBP) Volatility Worsens Further, ‘Brexit’ Polls Demand Market Attention
The Pound’s volatility soared on Monday morning as it suffered an easy drop on new ‘Brexit’ polls. According to a report from Bloomberg, the Pound was down against all 16 major peers and experienced its highest one-month volatility levels since February 2009.
As was the case last week, new EU referendum polls released on Monday indicated a strengthening shift in favour towards the ‘Leave’ campaign. The ‘Leave’ campaigners’ heightened rhetoric on immigration, as well as their faith in an EU-less Britain, has driven the movement.
According to a new web poll conducted by The Guardian, the ‘Remain’ camp has lost considerable ground in the last two weeks, with ‘Leave’ currently at 43% and ‘Remain’ at 40%.
However, the article also mentions alternate scores used to reflect criticisms that previous online scores had over-represented more conservative respondents.
‘With the adjustments to the make-up of the sample surveyed, remain keeps its lead. Opinium found that 43% of UK adults said they would vote to remain in the EU in a referendum, while 41% would vote to leave the EU and 14% don’t know how they would vote.’
Due to the Pound’s uncertain future in the event of a ‘Brexit’, with some economists predicting that it could even lose its status as a global reserve currency, Sterling plummeted and became increasingly volatile in response to news that Britain could leave the European Union later in June.
Euro (EUR) Strengthens on Disappointing US NFP
Despite a mixed week for Eurozone data, the Euro found itself stronger by the end of last week in response to news that the latest US Non-Farm Payrolls report had come in well-below expectations.
The key labour report revealed a low change in Non-Farm Payrolls of 38k, the lowest score since 2010. As a result, US Dollar investors, who had previously been weighing the chances of a US interest rate hike, flocked away from the ‘Greenback’. With EUR/USD being the world’s most traded currency pair, the plummet in US Dollar demand sent the Euro rallying across the board.
This was despite mixed Eurozone data throughout the week otherwise pressuring the Euro. Friday’s retail sales report revealed a drop from 1.8% to 1.4%, despite projections of improving to 2.1%. On the other hand, May’s final Eurozone Composite PMI beat expectations of 52.0 by scoring 53.1.
Last Thursday’s session had previously dragged the Euro down, as the key European Central Bank (ECB) policy meeting disappointed investors when ECB President Mario Draghi did little besides dovishly adjust the bank’s forecasts.
The Euro continued its advance on the Pound on Monday morning as ‘Brexit’ bets weakened the Pound and a decent investor confidence report from Sentix gave the shared currency a small boost. Confidence was up from 6.2 to 9.9 in June. However, German factory orders disappointed by slipping from 2.4% to -0.5% year-on-year.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Final Q1 Eurozone GDP Due Tuesday
The coming week’s economic calendars for the UK and Eurozone are relatively quiet. While it’s possible the Euro could react to US Dollar movement on Monday evening, with Fed Chairwoman Janet Yellen due to speak, Monday’s movement will otherwise be entirely ‘Brexit’ driven.
As new polls continue to be released this week and show strengthening support for ‘Leave’, the Pound’s volatility will increase and the currency find it increasingly difficult to hold on to gains.
Tuesday’s session sees the release of a small set of influential Eurozone data. German industrial production is currently expected to improve from 0.3% to 1.0% year-on-year, which could sturdy the Euro if it prints above expectations.
The Eurozone’s final Q1 Gross Domestic Product (GDP) report is also due on Tuesday morning. While it is likely the score will match the preliminary figures of 1.5%, a deviation from this could inspire Euro movement.
Britain’s economic calendar is set to be relatively low-influence until Wednesday’s industrial and manufacturing production reports, but investors may not react to this regardless if there is fresh ‘Brexit’ news.
The Pound Sterling to Euro (GBP/EUR) exchange rate currently trends in the region of 1.2710, while the Euro to Pound Sterling (EUR/GBP) exchange rate trades at around 0.7865.
