The Pound Sterling to Euro (GBP/EUR) exchange rate strengthened back above the 1.28 level as concerns over the outcome of the upcoming Greek elections and increased speculation that the European Central Bank will have to introduce a quantitative easing programme weighed upon the single currency.
Earlier the Pound Sterling to Euro (GBP/EUR) exchange rate is forecast to advance over the course of the week as investors are expected to grow jittery ahead of next week’s Greek general election.
Today, the GBP/EUR exchange rate was trading in the region of 1.27 after Sterling softened on speculation that the UK economic recovery is too weak for the Bank of England to warrant hiking interest rates this year. That view was supported by a string of weaker than forecast PMI reports, which showed that activity in the UK’s services and construction sector slowed. Sterling also weakened against the US Dollar (USD).
‘The Pound is falling against the Euro and Dollar because of the divergence view on monetary policy between the Bank of England and the Fed. The economic momentum in the UK is not as strong as many believed,’ Said Peter Rosenstreich, chief analyst at Swissquote Bank.
Greek elections in focus
Sterling is likely to push higher against the single currency as we get closer to next week’s general election in Greece. Economists are jittery and uncertain over the outcome and comments made by current Prime Minister Antonis Samaras did little to calm nerves.
Mr Samaras promised the Greek electorate that he would ease the nation’s tough austerity measures; ‘I personally guarantee there will be no more pension or wage cuts. The next breakthrough in our growth plan includes tax cuts across the board which can happen gradually, step by step.’
The comments are likely to unsettle Greece’s creditors in the European Union (EU) and International Monetary Fund (IMF).
A recent poll showed that Samaras has failed to narrow the lead held by his main opponent, Syriza’s Alexis Tsipras. If Syriza wins then the Euro will likely fall sharply as economists fear that Greece could leave the Eurozone either by choice or by necessity.
For the rest of Monday’s session the GBP/EUR exchange rate is forecast to see little in the way of movement due to a lack of market moving data releases.