UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate edged higher by around 0.19% on Tuesday morning.
As traders await British sales data, due for publication later on Tuesday, the Pound edged higher versus many of its major peers. The appreciation has been somewhat laboured, however, as investors continue to fear the fallout from the 2017 EU referendum.
The Euro, meanwhile, softened versus most of its major competitors as tensions in Greece reach boiling point. With a very high likelihood that the cash-strapped nation will default on June’s International Monetary Fund (IMF) payments, and with time running out for the Hellenic nation to secure bailout funds, the likelihood of a forced Greek exit from the Eurozone has seen dampened demand for the shared currency.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.4119.
During Friday’s European session, the Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.11%.
Despite registering positive data results on Friday, the Pound softened versus the majority of its most traded currency rivals. The declination can be attributed to jitters regarding the referendum on Britain’s membership with the European Union. With mounting fears that Prime Minister David Cameron’s attempt to make the case for a change to the relationship will fall on deaf ears, the potential for drawn-out talks and trader uncertainty will weigh on demand for the British asset.
As he entered the talks, Cameron said: ‘It is an opportunity to start some of the discussions about the reform of the European Union. There will be ups and downs – you’ll hear one day this is possible, the next day something else is impossible.’
The shared currency, meanwhile, edged higher during Friday’s European session despite the fact that Greece was unable to progress towards unlocking financial aid during the Eurogroup meeting in Riga. However, fears regarding the potential for a forced Greek exit from the Eurozone are weighing on investor confidence. The fractional single currency appreciation can be linked to reasonably positive data results, with particular reference to German growth data which met with forecast figures.
Pound Sterling (GBP) Exchange Rate Forecast to Fluctuate on EU Referendum Anxieties
Over the coming months, whilst Cameron attempts to reform Britain’s relationship with the EU and we progress towards the 2017 referendum, there is the potential that the Pound will pare the gains initiated by the Conservative victory in the general election. Uncertainty from British banks and businesses could weigh heavily on demand for the British currency.
With EU Commission President Jean-Claude Junker set to meet with the British PM on Monday, investor uncertainty has the potential to dominate Sterling trade over the coming week. With that being said, should the talks lead to the EU accepting Cameron’s proposal, it will likely see the Pound rally in a similar vein to the post-election appreciation.
In terms of economic data, of most significance for those invested in the Pound will be the preliminary results from 1st-quarter British growth data. Gross Domestic Product showed growth of 2.4% in the first quarter of 2014.
Euro (EUR) Exchange Rate Forecast to Fluctuate on Geopolitics
With the situation in Greece reaching crisis point as the Hellenic nation moves towards insolvency, fears will mount that Athens will be unable to unlock vital financial aid in time to meet the International Monetary Fund (IMF) payment due in June.
‘They [Greece] have been listening to too many people who think that there may be some partial agreement,’ said one senior Eurozone official involved in the talks. ‘There will be no such thing. And there will be no agreement without IMF. And the IMF is super tough.’
For those invested in the shared Currency; German Retail Sales and Consumer Confidence data will be of most significance. With a particularly sparse economic calendar, however, the Euro is most likely to be subject to geopolitical changes.
At the close of last week, the Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the region of 1.3958 – 1.4094.
