Euro to Pound Exchange Rate Steady but EUR/GBP Forecast Volatility on Euro Crisis

May 16, 2014 - Written by Frank Davies

STORY LINK Euro to Pound Exchange Rate Steady but EUR/GBP Forecast Volatility on Euro Crisis

The Euro to Pound exchange rate remained steady as both the Pound Sterling and the Euro currencies remained under pressure from negative data released earlier in the week. The Euro to Pound Sterling exchange rate is trading down -0.32% at 0.81420 EUR/GBP.

The Euro softened slightly as a report showed that new car sales in the Eurozone increased at the slowest rate in five months and concerns are growing that next week’s European elections could trigger political uncertainty.

Many of the Eurozones established groups are on the receiving end of public anger over continuingly high unemployment and cuts to public services. Some economists are worried that a surge in support for Eurosceptic parties could create instability and kick-start the Eurozone crisis.

“Although the periphery has come a long way from the darkest days of the economic crisis, opinion polls lined to this month’s European elections serve as a reminder that economic are still playing out. Specifically, discontent over high levels of unemployment and changes to living standards remain at extremely high levels and both European institutions and domestic political ones are being blamed.

A recent national Greek opinion poll suggests that the PM’s coalition partner Pasok has only 5.5% of a vote, with this party taking a lot of the blame for the crisis. If a general election were to be called now, this coalition would probably not survive. This suggests a rocky political landscape is still a potential threat in Greece.

In Portugal too, opinion polls suggest that support for the ruling coalition has plunged and that anger stemming from the impact of the crisis is still extremely raw. In Spain too domestic political parties are also reportedly taking a lot of the blame for the continue impact of the crisis.

The nature of democracy means that politicians seek to be popular. The implication is that momentum towards structural reform in Europe could be lost as general elections near. This is turn could dull the attraction of peripheral assets. The crisis may yet come back to bite us,” said Jane Foley from Rabobank.

Contributing to concerns over the region’s economy was the release of data showing that the number of cars sold in the Eurozone increased by the slowest rate seen in five months in April as concerns over the region’s economy weighed.

The European Automobile Manufacturer’s Association said that car sales increased by 4.2% year-on-year. Sales in Germany fell by 3.6% in April. Italian sales were little changed posting a slight rise of 1.9%. Sales in France advanced by 5.85%. Spain led the way in terms of Eurozone economies with sales advancing by 28.7% due to the introduction of a car scrappage programme.

Euro to Pound Sterling Forecast

The currency pair is unlikely to move much for the rest of the day due to a lack of economic data releases from both the UK and Eurozone.

Data out of the USA could send the Euro softer. Due today is the latest housing starts, building permits and consumer sentiment data.

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TAGS: Euro Forecasts Euro Pound Forecasts Pound Sterling Forecasts