Euro to Pound Exchange Rate Forecast to Hold Gains as Markets Close for Easter

April 6, 2015 - Written by John Cameron

STORY LINK Euro to Pound Exchange Rate Forecast to Hold Gains as Markets Close for Easter

Just before UK and European markets closed for the Easter break, the Euro to Pound Sterling exchange rate advanced by around 1% to trade in the region of 0.7330. While the Pound declined against a number of its peers in response to the UK's below-forecast Construction PMI, the Euro broadly gained. The Pound also softened as a result of ongoing UK political concerns.

The Euro also rallied against the US Dollar on Thursday amid speculation that Greece’s latest reform proposal will finally be accepted by creditors. Recent positives from European ecostats also aided the single currency uptrend. Conversely, the US Dollar softened versus the vast majority of its most traded currency rivals. This was as a result of less-than-ideal manufacturing data. Friday ought to see the Euro to US Dollar exchange rate hold gains as traders await key US labour market data due later on Friday afternoon.

After Athens submitted their latest proposal for reform to creditors, fears of a Greek exit from the Eurozone eased somewhat. This initiated a common currency surge despite the fact that confidence regarding its acceptance wasn’t shared by everyone. ‘We sent a new document today to the Brussels Group (of EU/IMF lenders) which is more specific and quantified,’ a Greek finance ministry official told reporters. But Jose Manuel Barroso, the former European Commission president said; ‘I believe they would lose a lot if [the country] leaves the EU, because today, in the 21st century, versus the US, China, countries of 60 million people cannot speak at the same level - they do not have the same leverage - and we have to use the EU and our common leverage to count in the world.’

The US Dollar softened versus the majority of its most traded currency rivals on Thursday despite comparatively positive data. The declination is as a result of a disappointing manufacturing data publication on Wednesday. Friday’s US labour market data will be of significance and has the potential to provoke US Dollar volatility. Change in Non-Farm Payrolls is forecast to hit 248,000; down from the previous figure of 295,000. Unemployment Rate is forecast to equal the previous figure of 5.5%. Speaking about trade on Good Friday, Reuters reporter Ryan Vlastelica wrote; ‘Trading could be volatile as market participants will be unable to trade off the March nonfarm payrolls report until Monday, as financial markets will be closed for the Good Friday holiday. Some traders may close out positions or adjust their portfolios ahead of time.’

In the week ahead, the Euro to Pound Sterling currency pair could well experience volatility in response to the Bank of England policy meeting, the UK's Services PMI and UK trade balance data. Any reports which could prompt the BoE to bring forward UK interest rate increases will be Sterling supportive.

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Should Greece’s latest reform proposal get rejected by creditors, the common currency will slide across the board.

The US Dollar is likely to benefit if Greece’s proposal is not deemed acceptable because dampened trader risk-appetite will see increased demand for safe-haven assets.

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