UPDATE
The Euro to Pound Sterling (EUR/GBP) exchange rate declined by around -0.3% on Wednesday morning.
As Greek MPs prepare to vote on the second package of reforms to unlock financial aid, the shared currency edged lower versus its major peers. Although geopolitical tensions in Greece have eased considerably since Prime Minister Alexis Tsipras agreed terms for the third bailout package, there is still uncertainty regarding the feasibility of austerity measures with nothing by way of debt restructure.
The Pound, meanwhile, strengthened versus its major rivals as traders await minutes from the most recent Bank of England (BoE) policy meeting. Many analysts anticipate hawkish sentiment from the Monetary Policy Committee (MPC), and some rate hawks predict that there will be dissenters who argued for an immediate benchmark interest rate hike.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7008.
Yesterday…
Euro (EUR) Exchange Rate Forecast to Strengthen against the Pound as Geopolitical Tensions Ease
The Euro to Pound Sterling (EUR/GBP) exchange rate edged higher by around 0.2% on Tuesday morning.
The situation in Greece improved after Athens used a bridging loan to repay debt owed to creditors and the shared currency is generally trending higher versus its currency rivals as a result. However, some analysts predict that Greek uncertainty will remain for some time to come. Credit Agricole economists have forecast that uncertainty will continue to surround Greece because the new deal does not adequately address debt restructure and is only delaying the inevitable return to negotiations.
Although not all analysts agree that uncertainty will continue to plague Euro investors, most forecast shared currency depreciation. This is due to traders shifting focus from geopolitics to quantitative easing. The European Central Bank (ECB) indicated that QE will continue for the full program despite positive signs emerging from many Euro-area economies.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.6966.
Pound Sterling (GBP) Exchange Rate Forecast to Decline against the Common Currency (EUR) as Government Borrowing Rises
British economic data produced a mixed-bag of results on Tuesday. June’s Public Finances increased from 11.9 billion to 13.9 billion, and Central Government NCR increased from 13.2 billion to 17.7 billion in June. Public Sector Net Borrowing managed to avoid the median market forecast rise from 8.4 billion to 8.7 billion, with June’s result reaching 8.6 billion. PSNB ex Banking Groups came in at 9.4 billion in June; bettering the market consensus of a drop from 9.1 billion to 8.9 billion.
In response to the fall in government borrowing, a HM Treasury spokesperson stated; ‘Today’s figures show that our deficit reduction plan is working, with cumulative borrowing over £6bn lower than at this point last year. We have more than halved the deficit, but with debt over 80% of GDP the job is not done. That is why we will continue to work through our long term plan to achieve a budget surplus in normal times and secure a better economic future for working people.’
The Euro to Pound Sterling (EUR/GBP) exchange rate dropped to a low of 0.6944 today.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Soften on BoE Rate Hike Bets
Although the shared currency is likely to hold gains over the British asset during Tuesday’s European session with an absence of further domestic data to provoke volatility, the Pound Sterling to Euro (GBP/EUR) exchange rate is forecast to strengthen considerably over the long-term. This is due to the fact that monetary policy divergence between the UK and the Eurozone is set to widen as futures trader bring forward bets as to the timing of a Bank of England (BoE) rate hike.
The Euro to Pound Sterling (EUR/GBP) exchange rate climbed to a high of 0.6974 today.