The Euro to Pound Sterling (EUR/GBP) exchange rate continued to decline as speculation increased that the ECB will introduce a quantitative easing programme at next weeks policy meeting. The currency also fell as investors used an earlier spike higher as an opportunity to take some profit.
On Monday the Euro to Pound Sterling (EUR/GBP) exchange rate weakened on Monday as investors grow increasingly jittery ahead of next week’s Greek general election and as speculation rises that data released this week will boost the argument for the European Central Bank (ECB) to introduce a quantitative easing programme.
With a lack of market, moving economic data releases from the Eurozone the single currency was vulnerable to speculative trading and events from outside the financial markets. Economists are expecting data out of Italy, France and Germany this week will disappoint and increase pressure on the ECB to take more monetary easing measures at its January policy meeting.
Of particular interest to traders will be Wednesday’s Eurozone industrial production report, which is forecast to show more declines. Eurostat is expected to release a report, which will show that production in the 19-member currency blog stagnated in November.
German gross domestic product data (GDP) released on Thursday is forecast to show that economic growth in the economy increased by 1.49%, a figure just below that of the 1.50% forecast. Balance of trade data released on the same day is also likely to disappoint as exports fall.
The biggest event for the Euro this week however will occur on Friday when the Eurozone’s inflation report for December is released. The region’s inflation rate is forecast to have fallen from 0.3% to -0.2% on an annual basis and weakened from -0.1% to -0.2% on a month on month basis. The data is likely to confirm that the region has slid into deflation territory.
Greece election result in doubt
Also weighing upon the Euro is the uncertainty surrounding the result of the Greek general election. A recent poll showed that Syriza was on course to beat current Prime Minister Antonis Samaras New Democracy party.
Samaras’s previous warning that a Syriza government would trigger chaos seems to have failed to woo voters. The Prime Minister has now changed his tact by saying that his government would not make any further cuts to wages or pensions.
‘The strategy of fear that the conservatives have campaigned on clearly hasn’t worked. Greeks are not buying the theory that the opposition poses a danger so now Samaras in altering course,’ said Paschos Mandravelis, a political commentator.
If voters believe Samaras then the gap between the two parties could narrow and lead to the same situation we saw in 2012 when Greeks had to vote twice. Such an outcome is likely to drag out the uncertainty in the markets and do little to aid the Euro.
Euro Exchange Rates:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.1802 ,
Euro,,British Pound,0.7791 ,
Euro,,Australian Dollar,1.4448 ,
Euro,,Canadian Dollar,1.4020 ,
[/table]
