- Sterling (GBP) Exchange Rates Climb – Latest EU referendum polls suggest ‘Remain’ victory
- Euro (EUR) Conversion Rates Cool – ECB readying corporate bond purchases
- GBP/EUR Forecast to Hold Gains Today – Lack of data to provoke changes
- UK Industrial/Manufacturing Data Forecast to Provoke Volatility – Weak UK sectoral growth could weigh
Pound Sterling (GBP) Exchange Rates Rally on Latest EU Referendum Opinion Polls
The Pound Sterling to Euro (GBP/EUR) exchange rate rallied by around 1.0% on Tuesday afternoon.
Overnight the British Pound spiked versus its major peers despite the lack of an obvious catalyst. Traders have now attributed the odd move to an error, perhaps the unintentional triggering of a programme designed to buy and sell assets to avoid massive losses.
During the European session the Pound extended gains versus its major peers, reacting to the latest EU referendum opinion poll that indicated ‘Remain’ will be victorious. YouGov, which conducted the poll, stated;
‘After a series of polls from different companies suggesting some movement towards the Leave campaign (including a four point leave lead in our previous poll, conducted last week) our latest poll for the Times (conducted on Sunday and Monday) shows Remain back ahead by a single point. It’s possible that last week’s polls were a short term movement caused by new immigration figures and the issue of immigration being in the news and now the agenda has moved on again the Remain vote is recovering. Alternatively, either last week’s poll or today’s are just some of the random noise that is unavoidable in all polling.’
Sterling’s increased volatility highlights trader uncertainty with regards to how the UK will vote on June 23rd, indicating that the result will be very close.
‘We expect ‘Remain,’ but the issue is the polls are really, really close,’ stated David Owen, chief European economist at Jefferies International Ltd. ‘This makes it really difficult for markets that want certainty. We have to be fairly cautious going into the 23rd.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2843.
Euro (EUR) Exchange Rates Struggle ahead of ECB Corporate Bond-Buying
Despite registering positive domestic data results, the single currency cooled versus most of its major peers. Even an upward revision to first-quarter Eurozone Gross Domestic Product wasn’t enough to offset Euro losses. This is perhaps due to speculation that growth will slow in the second-quarter.
‘The fact that both household consumption and investments are improving is helping a more sustainable recovery in the Eurozone,’ said Bert Colijn, senior economist at ING Bank. ‘Without strengthening exports, it seems likely that the pace of growth will decline somewhat this quarter, but a moderate pace should be maintained.’
Also weighing heavily on demand for the common currency is mounting scepticism regarding the forthcoming European Central Bank corporate bond-buying programme. The research team at BBH said;
‘It is not immediately clear how much corporate bonds the ECB will buy. The increase 20 bln Euro increases in purchases the ECB announced in March are not expected to be fully accounted for by corporate bonds. That would seem to suggest the ECB is not as concerned as some investors about running out of eligible paper. Given various considerations about the size of the European corporate bond market and of individual issues, most estimates suggest a range of 5-10 bln corporate bonds a month may be bought. We suspect the upper end of the range may be difficult to achieve on a sustained basis.’
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.2713 during Tuesday’s European session.
GBP/EUR Exchange Rate Forecast: UK Sectoral Data to Provoke Volatility
Given the absence of further domestic data publications today, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to hold gains for the remainder of Tuesday’s trade.
Tomorrow should see significant volatility, however, with British Industrial and Manufacturing Production reports for April due for publication. Sectoral growth in the UK has been markedly weak, so another set of disappointing figures could weigh heavily on the Pound.
With a complete absence of significant European data publications tomorrow, the Euro will likely see changes in response to US Dollar positioning and any developments regarding the ECB’s latest stimulus measures.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.2899 during Tuesday’s European session.
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