Pound to Euro (GBP/EUR) Exchange Rate Climbing; Mid Week Data Will Influence
The British Pound (GBP) was trading against the Euro (EUR) between 1.2530 and 1.2599 on Friday, following poor UK and Eurozone data releases.
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The trade balance deficit widened unexpectedly in June, which surprised economists. Total Trade Balance figures reached -£2459, higher than the previously forecast -£2050.
On a lighter note, UK Construction Output rose by 5.3%, bypassing the 4.7% forecast.
Economic expert Martin Beck commented: ‘The (trade) problem is largely out of the UK’s hands. This is unlikely to remain the case for the foreseeable future. Sterling rose further in July while the Eurozone economy looks set for little growth in Q2.’
The UK shot to fame in recent months following the prospect of interest rate hikes by the Bank of England (BoE). However, as these hikes have failed to materialise and the US economy has grown—as demonstrated by data releases—the US Dollar (USD) has become bullish in the currency market.
In recent weeks however the UK economy has underperformed, with data publishing showing further negative figures. However, in positive news Friday saw the UK housing levels seen to be expanding rapidly.
Economist Rob Wood commented: ‘We expect (the improvement) to continue, particularly as the housing market now seems to be shaking off the effects of tougher mortgage rules, with loan approvals rising 8% in June.’
Both the Euro and the Pound are trading in a market shrouded by unstable geopolitical developments. With the recent downing of Malaysian Airlines passenger flight MH17 by Russia, and the US now becoming more developed in Iraq tensions, the currency market is volatile.
Investors are putting faith in less volatile currencies, such as the Australian Dollar and Canadian Dollar losing which have lost favour in search of safe haven assets such as the Japanese Yen.
Economist at Markit, Chris Williamson, commented on the geopolitical tensions surrounding the Pound: ‘Already weak demand in many overseas markets is being hit further by growing uncertainty about the Ukraine crisis, especially in Northern Europe. Escalating geopolitical events in Gaza and Iraq add to the sense that global risk aversion is creeping higher, which will inevitably mean slower economic growth.’
The Euro however saw a poor week, with Italy showing two consecutive quarters of contraction which has led them into their third recession since the global economic crisis of 2008.
Furthermore the German trade surplus dipped on Friday, to an unpredicted 15.0B, despite economists expecting 18.9B.
For now the GBP to EUR exchange rate remains volatile, with the hope that data releases in the latter half of next week could boost the currencies. The outcome of airstrikes in Iraq will prove an interesting catalyst in the currency market.
Pound to Euro Update – 11/08/14
The Pound to Euro exchange rate is presently residing at 1.2540 Monday morning, showing Sterling climbing against the Single Currency for the first time in recent days. This session has seen highs of 1.2545 and lows of 1.2505.
Currencies in the market have been trading amid geopolitical tensions with regards to the conflict in Iraq, and more poignant for the EU, Russia and Ukraine sanctions.
With Russia banning the importation of some EU and US produce, both the Pound and the Euro will see the affects.
Managing Director of a EU business Justin Beckett commented: ‘As you can imagine, it’s very disappointing.’
Tuesday will see an influential day for the Euro with the publication of Eurozone and German Economic Sentiment figures, whilst the German Consumer Price Index will reach publication on Wednesday.
Conversely, the Pound will see influence on Wednesday by way of UK Average Weekly Earnings, Employment Change, Claimant Count Rate, and Jobless Claims figures on Wednesday.