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Pound Euro Exchange Rate Trends Higher Despite Calls for ?Meaningful? Greek Debt Relief

November 14, 2016 - Written by Minesh Chaudhari

GBP/EUR Exchange Rate Trended Higher Despite Better-than-Forecast Eurozone Production Data



Thanks to the continued strength of the US Dollar (USD) demand for the Euro (EUR) has been generally soft at the start of the week, particularly as concern over the possibility of further populist backlash within the Eurozone itself ferments.

Although President Barrack Obama called for Greece to be offered ‘meaningful debt relief’ this failed to encourage particular confidence in the single currency, with the conclusion of the next round of talks with auditors unlikely to be swift.

Investors were equally discouraged by September’s Eurozone industrial production data, despite the figures bettering forecast, as negative headwinds continue to cloud the outlook of the domestic economy.

However, as Bert Colijn, senior economist at ING, noted:

‘The PMI for manufacturing surged in October as businesses indicated that production, new orders and employment growth in the sector accelerated and new orders are now somewhat higher than in the beginning of 2016. This means that the outlook for industrial output is cautiously brighter for the end of the year, but no miracles can be expected in the current uncertain economic environment.’


Brexit Worries Continued to Limit Pound Sterling Strength



Demand for the Pound Sterling (GBP), however, was generally weaker on Monday as confidence in the prospect of a swift US-UK trade deal weakened.

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Markets remain cautious as the Supreme Court hearing on the government’s Article 50 appeal draws closer, with further Sterling volatility expected regardless of the outcome of the hearing.

Even so, thanks to the weakness of the single currency, the Pound Sterling Euro (GBP EUR) exchange rate was encouraged to trend higher.

Speculation over Trump’s fiscal stimulus policies prompted investors to pile out of government bonds, meanwhile, pushing borrowing costs up and potentially causing a headache for the Pound and the UK economy further down the road.

Rising UK Inflation Forecast to Weigh on GBP/EUR Exchange Rate



The appeal of the Pound could weaken on Tuesday, with October’s UK Consumer Price Index forecast to have strengthened further on the year.

Rising inflation may not offer much encouragement to the GBP/EUR exchange rate, given that the Bank of England (BoE) has pledged to look through any short-term increase in inflationary pressure.

Also of interest will be Wednesday’s raft of domestic employment data, which could exacerbate worries over the outlook of the UK economy if wage growth is shown to have remained lacklustre.
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