UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a tight range on Tuesday morning.
As traders await the British Consumer Price Index, the Pound is holding steady versus its currency rivals. Given that the lack of inflationary pressure has been a stumbling block for a Bank of England (BoE) benchmark rate hike, today’s inflation data is likely to provoke significant Sterling volatility.
The Euro, meanwhile, is also trading comparatively statically with a complete absence of domestic data publications to provoke changes. Spain, Estonia and Austria will all vote on the latest terms of the third Greek bailout today. Should they all approve the new terms the Euro is likely to trend higher.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.4057.
Yesterday…
Pound Sterling (GBP) Advances after BoE’s Forbes warns against Holding Low Rates
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a limited range on Monday afternoon.
During the early stages of Monday’s European session, the Pound advanced across the board thanks to hawkish comments from Monetary Policy Committee (MPC) maker Kristin Forbes. She warned that keeping the bank rate at the record-low 0.5% could prove to be a drag on Britain’s economic progress. ‘Waiting too long would risk undermining the recovery – especially if interest rates then need to be increased faster than the gradual path which we expect,’ she said.
Whilst the comments have been met with enthusiasm by traders, the controlled nature of the Pound’s ascent is likely to be connected to underlying fears that Forbes’ outlook is not shared by the majority. This was evidenced on ‘Super Thursday’ where MPC members outlined concerns regarding the lack of inflationary pressure, outside influences, and British families’ ability to cope with even a small rate increase. As Monday’s European session progressed, the Pound lost gains thanks to fears that Tuesday’s inflation data will print poorly.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.4085.
Euro (EUR) Softens despite Positive Eurozone Trade Balance Data
Although many fears regarding the potential for Greece to default on upcoming loan repayments have been allayed since terms for the third bailout package were accepted by Greek MPs, there is still a great deal of trepidation shown by traders as evidenced by the Euro downtrend; albeit fractional. Many are concerned that Germany has expressed apprehension to accept the proposal because the International Monetary Fund (IMF) will not be involved. However, the IMF had made it very clear that they will not have a hand in the latest bailout unless some form of debt restructure is implemented. This has become a significant sticking point and could delay progress.
Eurozone Trade Balance data showed that the surplus widened in June. This was to be expected given the low value of the Euro and dampened demand for imports with geopolitical uncertainty hindering demand.
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.4054 today.
Rate Hawks to see Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Gains
Given that the Eurozone Trade Balance data is unlikely to have a significant impact on single currency movement, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to hold steady for the remainder of Monday’s European session as traders look ahead to influential British data over the coming week.
Looking ahead to Tuesday, there will be several influential economic data publications with the potential to provoke changes for the GBP/EUR exchange rate. Perhaps most significant will be UK inflation data. The Consumer Price Index hit 0.0% previously, so policymakers will be hoping for improvement to pressure a rate hike. An absence of European data will see the shared currency subject to geopolitical developments.
The Pound Sterling to Euro (GBP/EUR) exchange rate climbed to a high of 1.4153.