The Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates both recorded gains in Tuesday’s European trading despite a fall in Markit’s UK Construction Purchasing Managers Index (PMI).
The decline in the UK’s construction sector is largely attributed to pre-general election jitters causing concern amongst businesses—an expected development with such a major vote ahead. The index slipped from 57.8 to 54.2 in April, a 22-month low.
As political parties vie for votes, speculation regarding Thursday’s election result is likely to heat up dramatically and could pressure the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates lower.
Commenting on the Markit report, industry expert David Noble stated: ‘The general election has given the sector pause for thought as procurement and supply management professionals reported a slowdown in the pace of new construction orders growth. Though the index still remains in positive terrain, this deceleration has been attributed to project delays and hesitancy as the country prepares to vote.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast
Meanwhile, the Euro has been trending lower as Greek negotiations continue to make little progress, heightening speculation that a ‘Grexit’ could indeed occur.
Tuesday has seen Italian foreign minister Paolo Gentiloni comment: ‘Italy’s government considers [it] short-sighted and dangerous to underestimate the Greek crisis.’
Furthermore, questions are being raised over whether the May 11th Eurogroup meeting could see Greece offered some financial liquidity assistance as the nation remains on the precipice of running out of funds.
Meanwhile, the European Commission slashed its economic growth forecasts for Greece on Tuesday as a result of the ongoing negotiations. The European Commission has suggested growth could remain near 0.0% this year.
— Peter Spiegel (@SpiegelPeter) May 5, 2015
The commission stated: ‘Positive momentum… has been hurt by uncertainty since the announcement of snap elections in December. The current lack of clarity on the policy stance of the government vis-á-vis the country’s policy commitments in the [bailout] support arrangements worsens uncertainty further.’
Wednesday could see additional Euro exchange rate movement with the release of Eurozone Retail Sales figures. However, on the year, economists have forecast a slip from 3.0% to 2.4% in March.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast
Meanwhile, the US Dollar to Pound Sterling (USD/GBP) and US Dollar to Euro (USD/EUR) exchange rates are likely to experience fluctuations later in Tuesday’s trading with the release of the US ISM Non-Manufacturing Composite figure, as well as the US Trade Balance report. Both events could cause some USD swings but economists have forecast the data will print unfavourably and therefore the ‘Buck’ could sink.
The US trade deficit climbed from a negatively revised -$35.9B to -$51.4 billion in March, the widest since October 2008.
Looks like another downward revision to US Q1 GDP…$DXY
— Michael Hewson (@mhewson_CMC) May 5, 2015
Friday will be a major day for the US Dollar with the highly influential US Change in Non-Farm Payrolls and Unemployment Rate figures due to emerge. If the US Unemployment Rate should drop from 5.5% to 5.4% as forecast, the US Dollar could rally.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading at 1.5121. The Pound Sterling to Euro (GBP/EUR) exchange rate is trending in the region of 1.3598.