Update
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a narrow range on Monday morning.
As traders await British economic data, due for publication later on Monday morning, the Pound is generally holding steady versus most of its major peers. A fractional declination can be attributed to ongoing concern regarding political uncertainty as we draw ever closer to the general election.
The Euro, meanwhile, has been trading relatively statically; even after an improvement in the German Import Price Index. The lack of movement can be linked to traders awaiting the European Central Bank (ECB) Asset Purchase Announcement. Although most don’t expect any changes at this early stage, there is a very slight possibility that the bond-buying programme will be reduced given that quantitative easing has already had a positive effect.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3955.
At the close of last week, the Pound Sterling to Euro (GBP/EUR) exchange rate advanced by around 0.40%.
Although generally weaker, amid political uncertainty as we draw ever closer to the general election, the Pound strengthened last Friday. The appreciation was likely the result of traders readjusting as general election concerns have been priced-in to a large extent. In addition to unjustified losses, the British asset found support thanks to improved sentiment towards the Bank of England (BoE), after minutes from the most recent policy meeting saw hints of a sooner-than-expected rate hike.
The Euro, meanwhile, softened over the course of last week as the situation in Greece looks no closer to resolution. A key meeting of Eurogroup officials in Riga on Friday only exacerbated the single currency declination. The meeting saw the inexperienced Greek Finance Minister getting a verbal hammering from Eurozone officials. It has been made very clear that the cash-strapped country has very little time left to produce acceptable reforms.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3967 at the close of last week.
Pound Sterling (GBP) Exchange Rate Forecast to Soften ahead of General Election
Although there will be several influential domestic data publications over the coming week, the Pound is likely to soften as political uncertainties will be amplified the closer we get to the general election conclusion. However, positive results from domestic data publications could slow the declination, and even provide temporary rallies.
Of particular significance, in terms of economic data, will be the yearly 1st-quarter Gross Domestic Product. It will be interesting to see if the fears surrounding the general election have spilled out into economic recovery.
In addition to the GDP; BBA Loans for House Purchase, GfK Consumer Confidence Survey, Net Consumer Credit, Mortgage Approvals and the Manufacturing PMI will all be of interest to those invested in the Pound.
The Manufacturing PMI will be a useful gauge as a comparison with other economies as all manufacturing data publications over the past week declined beyond expectations.
Euro (EUR) Exchange Rate Forecast to Decline
Given that Greece is very unlikely to produce an acceptable set of reforms within the coming week, the shared currency is likely to decline. With time running out for the cash-strapped nation, any hint of the fractious relationship between Greece and Eurozone officials deteriorating will result in a significant Euro dive.
With the threat of a Greek exit from the Eurozone dominating trader focus, domestic data is unlikely to have a significant impact. However, there will be a number of important publications which will be of interest to those invested in the common currency. Of particular significance, in terms of the potential to provoke volatility, will be; German Consumer Price Index, EU Harmonised German CPI, German Unemployment Rate, German Unemployment Change, Eurozone Estimate CPI and Eurozone Core CPI.
European Commission Economic Forecasts, German Retail Sales, German Consumer Confidence, European Central Bank (ECB) Economic Bulletin and Eurozone Unemployment Rate will all be of interest to those trading with the common currency.
Should there be any positive progress between Greece and Eurozone officials, the Euro is likely to rally significantly after registering large losses over the course of the past month.
Although UK data is unlikely to be greatly impactful ahead of the general election, it will be of significance in terms of gauging BoE cash rate hike timing.
European economic data will be of significance to those trading with the Pound given that BoE policymakers are looking towards improvement in the Eurozone economy as a basis for hiking rates.
At the close of last week, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending between a low of 1.3863 and a high of 1.3986.
