- More Polls Strike Fear Into Investors – Duo of opinion polls released this week mark increased pro-‘Brexit’ feelings.
- ‘Fat-finger’ Trade Rallies Flagging Pound – An apparent ‘error trade’ during Asian session left Pound tracking higher
- Strong UK PMIs Keep Pounds Head Above Water – Promising sector PMIs keep GBP fluctuating.
- EUR/GBP Future Uncertain as EU Vote Edges Closer – Fears over upcoming referendum keep Pound pressured.
German CPI, UK Construction to Drive EUR/GBP Movement
After advancing earlier in the session the Euro to Pound Sterling (EUR/GBP) exchange rate reversed gains as trading continued, falling to a low of 0.7805.
As the week draws to a close the pairing could experience volatility as a result of the publication of Germany’s final inflation figures for May and the UK’s construction output report for April.
(Previously updated 13:00 09/06/2016)
Euro Firms on German Trade Data
The Euro to Pound Sterling (EUR/GBP) exchange rate extended previous gains on Thursday as Germany published encouraging trade data.
Exports printed at 0.0% month-on-month in April rather than declining the -1.9% forecast. A surprising dip in imports resulted in a wider-than-anticipated trade surplus.
EUR/GBP trimmed its advance following the release of the UK’s trade data however as the nation’s deficit was shown to be narrower-than-anticipated.
However, the UK’s deficit with the EU was shown to be at a record high, prompting this comment from Scott Bowman at Capital Economics:
‘A weak trade position is compounding the domestic uncertainty created by the upcoming EU referendum. That said, the fall in trade-weighted Sterling since around mid-November should provide some support to exporters later this year and could augment a bounce back in domestic activity if the UK votes to remain in the EU.’
With the UK’s construction output data and the Bank of England’s 12 month inflation expectation report due for publication on Friday, further Euro to Pound Sterling (EUR/GBP) exchange rate movement is likely to occur. Positive results for the UK could give Sterling a little lift before the weekend.
(Previously updated 17:12 08/06/2016)
EUR/GBP Trims Losses Ahead of UK Growth Data
After sliding on Tuesday the Euro to Pound Sterling (EUR/GBP) exchange rate edged higher as the European session opened and investors looked ahead to today’s UK Industrial Production, Manufacturing Production and GDP data.
However, the common currency managed to maintain the higher ground against Sterling even as the UK’s industrial/manufacturing output reports impressed.
While ecostats from the Eurozone were lacking, EUR was lent support as the World Bank cut its US and global growth forecasts, a decision which weighed on US rate hike expectations.
The latest developments in the US Presidential campaign also weakened the US Dollar to the benefit of the Euro. With Hillary Clinton achieving the US Democratic nomination for President, political uncertainty increased and demand for the ‘Greenback’ eased.
The Pound also failed to benefit from the UK’s GDP figures, published later in the European session, despite the National Institute of Economic and Social Research (NIESR) indicating a slight acceleration in growth.
According to Economic Calendar: ‘The PMI data still suggested underlying vulnerability in May, but there is also evidence that demand for new cars was buoyant for the month. In this context, there will be some speculation that the economy has rebounded from a soft patch seen late in the first quarter as weather distortions ease.’
(Previously updated 17:30 08/06/2016)
Pound (GBP) Bounces Back Vs Euro (EUR) Following ‘Brexit’-Based Slide
Last week saw the release of two EU referendum opinion polls (ICM and YouGov) that indicated a rather large swing towards support for a ‘Brexit’ in the public consciousness. The Pound (GBP), already weakened by uncertainty surrounding the upcoming vote, saw a massive depreciation across the board as the majors edged their way up against Sterling.
The Euro enjoyed steady increases for the most part against the Pound last week, ending the Friday session at 0.7787, up from 0.7614; an increase of over 170 pips.
In mid-May there came a dip in the pairing’s value as Eurozone PMIs failed to hit forecast targets across the board. A speech in parliament from prominent Bank of England executives calmed fears for the Pound somewhat too as policymakers set their sights on damage control.
The EUR/GBP exchange rate saw another boost yesterday as well due to the release of another pair of polls hinting at the prospect of a ‘Brexit’.
However, an apparent ‘error trade’ in the Asian market overnight has inflated the Sterling’s value significantly this morning.
The British currency was able to extend gains against the Euro during the European session as YouGov’s latest poll put the ‘Remain’ camp in the lead and the UK’s House Price data exceeded estimates.
Economist Martin Ellis said of the housing data; ‘Low interest rates, increasing employment and rising real earnings continue to support housing demand. The strength of demand, combined with very low supply, is causing house prices to rise at a brisk pace in quarterly and annual terms.’
The Pound held its advance as trading continued, up almost 1% on the day’s opening levels.
The Euro to Pound (EUR/GBP) exchange rate currently sits at 0.7790.
Euro/Pound Sees Healthy Boost From UK Opinion Polls
As previously mentioned, the Euro enjoyed a nice boost against the Pound at the beginning of the week as the currency was gutted by influential polls.
Strong Eurozone market data also helped strengthen the common currency; First quarter Eurozone GDP data indicated a 0.2% increase year-on-year, German unemployment fell and the German retail sector saw a healthy jump from 0.6% to 2.3%. The retail figures indicate a possible increase in consumer confidence within the Eurozone’s most powerful member-state.
‘Brexit’-Battered Pound Reliant on Strong PMIs
The main influence in any currency pairing including the Pound right now is, of course, the public’s views on the UK’s EU referendum. As mentioned before; this week and last saw the release of a pair of opinion polls that utterly gutted Sterling, seeing it fall from a monthly high of 1.32 against the Euro to a low of 1.26 – a loss of approximately 6 cents.
Midway through last week the release of disheartening UK property sector data succeeded in furthering the Pound’s demise, with mortgage approvals decreasing drastically and house prices falling, echoing the uncertainty clouding the referendum. Worries of stagnation in the property market have prompted some retailers to include ‘Brexit clauses’ in upcoming purchases, giving the buyer leeway in the event of a UK exit from the EU.
Later in the week the Pound rallied somewhat due to strong services and manufacturing PMIs, which brought the composite figure up to 53 points from 51.9 – a much welcomed and needed increase. Sterling traded narrowly against the single currency for the rest of the week with the Euro’s power being sapped slightly by unconvincing Eurozone retail figures.
EUR/GBP Forecast: EU Referendum Uncertainty Remains Influential
This morning’s Eurozone GDP data indicated an increase from 1.5% to 1.7% which should have bolstered the Euro nicely. However, the common currency has actually spent the European session sliding against most of the majors.
Later in the week German inflation figures are set to be released. A rise in German inflation generally means a rise in Eurozone inflation.
Wednesday is pegged for the release of UK year-on-year manufacturing and industrial output. If both reports trounce forecasts then we can expect to see the Pound ascend somewhat. A UK GDP estimate is set to be released too, naturally an increase in the country’s GDP would be good news for the Pound. Year-on-year construction output rounds the week off, being released Friday. Again, if the report beats expectations by a significant margin it could mean a gain in strength for the emaciated Sterling.
