Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Soften ahead of ECB Rate Decision

Modified: Wednesday, 3 June 2015 15:18 BST - Written by John Cameron

STORY LINK Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Soften ahead of ECB Rate Decision

The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.28% on Wednesday morning. British data produced disappointing results on Wednesday which caused the Pound to soften versus the majority of its most traded currency competitors. Of particular disappointment, given that the services sector accounts for the majority of British gross domestic product, was the Markit/CIPS Services PMI which came in at 56.5 in May; well below the median market forecast 59.2. Coupled with less-than-ideal manufacturing data registered recently, it is unsurprising that the Composite PMI dropped beyond the market consensus.

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, said; ‘Momentum in the sector stalled in May, with the drop in the headline index the biggest fall for almost four years and likely to cause concern as services remains the UK’s largest driver of economic growth. However, the index still retained its position in positive territory and was higher than its long-term average, as survey respondents reported strong growth in new business for the twenty-ninth month running and continued to expand staffing levels.’

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3733.

Although European data produced mostly positive results, the shared currency is trending in a weak position versus many of its peers. The depreciation can be linked to ongoing difficulties with Greece as both the Greek government and the Eurogroup swap reform package proposals. Greece have warned that they will not pay the International Monetary Fund (IMF) on Friday if there isn’t a bailout deal on the cards.

As traders await the European Central Bank (ECB) interest rate decision, due to be reported later on Wednesday afternoon, the shared currency is unlikely to be subject to any significant changes. Although there is very little chance that the ECB will make any changes to the lending rate, the accompanying press conference from President Mario Draghi could provoke changes, especially if more is said about the central bank’s willingness to support the Hellenic nation.
Looking ahead to Thursday there will be several ecostats that have the potential to provoke GBP/EUR volatility. Of particular note will be the Bank of England (BoE) interest rate decision, although very few expect any significant policy alterations. The Eurozone and German Retail PMIs will also be of interest to those trading with the common currency. The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.3702 – 1.3785.

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TAGS: Pound Euro Forecasts