The Pound Sterling to Euro (GBP/EUR) exchange rate could resume its uptrend on Sunday, and potentially return to multi-year highs, if the Greek referendum sees the public vote against austerity.
UK Services PMI Impresses, Eurozone Retail Sales Climb, Pound Sterling to Euro (GBP/EUR) Exchange Rate Trending Lower
Positive data from the UK did little to support the Pound Sterling to Euro (GBP/EUR) exchange rate ahead of Sunday’s potentially Europe-changing ballot in Greece.
The GBP/EUR currency pair remained trending in the region of 1.4065 following the publication of the UK’s Services PMI, despite the gauge of the nation’s most influential sector showing a stronger-than-anticipated rate of expansion.
Services PMI rebounded from May’s five-month low of 56.5 to hit 58.5 – bettering the 57.5 forecast.
While the Pound did push slightly higher against the US Dollar after the data was published, its gains were fairly muted.
Markit economist Chris Williamson stated; ‘June’s rebound is therefore welcome news, but policymakers will want to see further improvements in the data, including signs of a sustainable upturn in pay growth, before feeling comfortable that the UK economy is ready for higher interest rates.’
The Euro also managed to continue trending in a stronger position against the Pound as the Eurozone’s Retail Sales report beat predictions.
Retail sales were shown to have increased by 0.2% in May, month-on-month, rather than the 0.1% expected. However, the annual consumer spending number still slid from 2.7% to 2.4% in May.
According to MarketWatch; ‘Sales volumes in Germany jumped 4.2% from May last year and rose 3.4% in Spain, indicating that household confidence has held up well, despite the threat of Greece leaving the currency area. Robust consumer demand earlier this week prompted Standard & Poor’s Ratings Services to raise its eurozone growth forecasts to 1.6% in 2015 and 1.9% in 2016, from its 1.5% and 1.7% forecasts made in March. By comparison, eurozone gross domestic product expanded 0.9% in 2014.’
News from Greece Impacts Euro (EUR) Exchange Rate Predictions Today: Nomura Analyst Outlook
The Euro to Pound Sterling (EUR/GBP) exchange rate remained trending in a moderately stronger position even as the International Monetary Fund (IMF) dramatically lowered its growth forecasts for Greece from 2.5% to 0.
The IMF’s assertions that the Hellenic nation needs lower borrowing costs and longer repayment periods in order to benefit from debt relief were taken as positive signs of the sort of negotiations which could take place after Sunday’s vote – if the public vote in favour of austerity that is.
Analysts with Nomura have presented this short-term Euro analysis; ‘breakup risk in the Eurozone is different in nature today compared to the early Euro-crisis days (2010-2012). Second, political risk in one country is not necessarily positively correlated to political risk in other countries. All told, we continue to hold the view that systemic contagion from Greece to the rest of the Eurozone is unlikely, even in the face of a NO vote in Greece on Sunday. And the price action this week tends to support this idea. Linked to this, investors should think very carefully before extrapolating the increase in redenomination risk in Greece to other countries.’
Today’s Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Referendum Result, Grexit Speculation and BoE Interest Rate Decision Ahead
Whether the Pound Sterling to Euro (GBP/EUR) exchange rate climbs back toward the seven-year highs of 1.43 achieved after the referendum was announced depends on its outcome.
A ‘No’ victory has the potential to see the GBP/EUR pairing test new highs, but a ‘Yes’ result could send the Pound scuttling back into 1.39/1.38 territory.
Investors with an interest in the Pound will also be looking to the Bank of England’s (BoE) upcoming interest rate announcement – despite the fact that the central bank is unlikely to make any adjustments to borrowing costs at the present juncture.
This gathering could see members of the Monetary Policy Committee (MPC) become spilt on the subject of when to raise interest rates and a division in the ranks would be Pound-supportive.
However, we will need to wait for the release of the minutes before we know whether such a split occurred.
The Pound Sterling to Euro (GBP/EUR) exchange rate is trading in the region of 1.4071, the Pound Sterling to US Dollar (GBP/USD) exchange rate is trading in the region of 1.5636, the Euro to US Dollar (EUR/USD) exchange rate is trading in the region of 1.1113, the Euro to Pound Sterling (EUR/GBP) exchange rate is trending in the region of 0.7106.