The Euro to GBP exchange rate was able to regain ground on Monday reaching its highest level in two weeks as the markets were spooked after a poll in a Sunday newspaper showed that support for Scottish Independence is building ahead of the September 18 referendum.
The Yougov poll showed that 51% of voters are intending to vote in favour of Scotland gaining independence from the United Kingdom.
Previously the Better Together Campaign had been enjoying a lead of 22-points. The reversal in fortunes is likely to be linked to Alastair Darling’s poor television debate performance and the deeply unpopular announcement by Westminster that MP’s should receive a pay rise.
The UK currency is forecast to make further declines against the Euro and its other major peers as the vote draws closer.
According to some economists, the Pound could decline by as much as 5% if Scotland does vote in favour of Independence.
Others are warning that the fall could be even higher.
Either way the drop in the Pound will be a positive for the UK’s exporters as a lower valued currency will make British goods more desirable to international buyers.
‘The latest poll will only add to the pressure on Sterling. This will certainly be a challenging week and Monday is likely to be particularly difficult day for the Pound,’ said Howard Archer, chief economist at IHS Global Insight.
The Euro found some support early in Monday’s session after data out of the regions’ largest economy came in better than forecast.
Data compiled by Germany’s Destatis showed that the nation’s trade balance increased to €22.2 billion in August, up from the preceding month’s figure of €16.4 billion and was better than economist forecasts for a figure of €16.8 billion.
That support was quickly lost however as a separate report released by Sentix showed that investor confidence in the Eurozone declined sharply to its worst level in 14 months, adding to concerns over the region’s economy.
Sentix said its index of investor confidence tumbled to -9.8 in September, the lowest since July 2013, from a reading of 2.7 in August.
Analysts had expected the index to decline to 2.0 this month.
The sharp drop comes despite the European Central Bank announcing a new interest rate cut and a quantitative easing style programme last week.
That is remarkable because ever since President (Mario) Draghi took office, the ECB has always managed to boost investors’ economic expectations with a variety of measures. This does not seem to be working anymore. The indicator points to another recession in the Euro zone,” Sentix said.
Because of the data, the Euro was trading at a 14-month low against the US Dollar.
UPDATE
The Euro gave up Monday’s gains against the Pound after economic data out of the UK offered support to the battered Sterling.
Industrial Production increased 1.7% on a year on year basis, beating economist expectations for a figure of 1.3%. The rise was the biggest recorded since February. Manufacturing production on a monthly and annual basis matched economist forecasts.
Weighing upon the Pound however, were continuing concerns over the upcoming Scottish Referendum vote and as a report showed that the UK’s trade deficit widened to £334 billion due to weakening trade with the Eurozone.
The Euro meanwhile came under pressure after data showed that France’s trade deficit widened more than forecast in July, increasing concerns over the strength of the Eurozone’s second largest economy.
Euro Exchange Rate News:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.2951 ,
Euro,,British Pound,0.8035 ,
Euro,,Australian Dollar,1.3853 ,
Euro,,Canadian Dollar,1.4121 ,
[/table]
