The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within a tight range on Tuesday morning.
After Gross Domestic Product data showed British growth was at its slowest pace since 2012, the Pound softened versus many of its major peers. The declination was quickly reversed, however, with expectations that GDP would slow amid election jitters. Traders will be hoping that this will push voters to stick with the Conservative party in order for the UK’s economic recovery to be fully realised.
The Euro, meanwhile, edged higher versus many of its major competitors despite a complete absence of domestic data to provoke volatility. The appreciation is likely the result of the positive reaction to the Greek government’s decision to sideline the Finance Minister’s role in Eurogroup negotiations.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3992.
Pound Sterling (GBP) Exchange Rate Edges Higher despite Poor Data
British economic data produced mixed results on Tuesday, but of particular disappointment was the slower-than-forecast pace of growth. On the year, first-quarter Gross Domestic Product was forecast to show 2.6% growth, but the actual result came in at 2.4%. On a quarterly basis that was a 0.3% increase compared with the median market forecast 0.5%.
Commenting on the figures, economist Anna Stupnytska said: ‘Looking ahead, the economy should pick up momentum in the second half of the year as further signs of stabilisation emerge in the housing sector and real income growth continue gaining pace. The strength of the Pound, however, particularly against the Euro, will remain a drag on growth this year. With inflationary pressures subdued for a bit longer, the Bank of England (BoE) is still unlikely to deliver its first hike this year.’
Ordinarily this sluggish growth data would cause the Pound to soften, but in a bizarre twist of fate the poor result could be seen as a positive stimulant for voters to stay with the Conservative party. Given that the economy has improved in most areas, it is possible that the Tories will see an influx of votes in order to re-establish better GDP.
The Pound Sterling to Euro (GBPO/EUR) exchange rate has fallen to a low of 1.3945 today.
Euro (EUR) Exchange Rate Ticks Higher on Varoufakis Replacement
After last Friday’s Eurogroup meeting went sour, there was tremendous pressure put on the Greek government to replace Finance Minister Yanis Varoufakis as the lead negotiator. A senior European Union official confided that it had become ‘impossible’ to do business with Varoufakis. ‘It had got to the point where eyes roll,’ he said. ‘People had got sick and tired of being lectured about austerity and the effects of the crisis. Any sympathy for Greece was eroded by his failure to draft concrete proposals.’
Prime Minister Alexis Tsipras bowed down to the pressure and sidelined Varoufakis; replacing him with Minister of International Financial Relations, Euclid Tsakalotos. Tsipras still defends Varoufakis, however, as to sack him could lead the Greek people to call for a snap election.
‘They [creditors] couldn’t counter his economic arguments rationally so they went for him claiming he didn’t understand Eurozone rules and regulations, that his reforms weren’t good enough,’ said one official. ‘Tsipras knows this is not about Varoufakis, but his government, because it has dared to take on the system that is Europe’s neoliberal doctrine. He knows that if one goes the other goes too, which is why Varoufakis is here to stay.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Steady
Given the absence of domestic data to provoke changes, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to hold steady for the remainder of Tuesday’s European session. Wednesday ought to see heightened GBP/EUR volatility with inflation data from the currency bloc’s most influential and powerful nation due for publication.
The Pound Sterling to Euro (GBP/EUR) exchange rate advanced to a high of 1.4016 today.
