The Pound reached a fresh three and a half year high against the Euro.
Foreign Currency Market Update – GBP / EUR Update
The Pound reached a fresh three and a half year high against the Euro last Wednesday of 1.2573 following the news from Athens that Greek political leaders were unable to form a coalition government. The inharmonious ricocheting of conflicting views between members of each party ensured that no accord was reached, signalling a fresh round of elections to be held next month. The Euro plummeted on the news, allowing Sterling to reach its record high in overnight trading, as Alexis Tsipras’ anti-austerity SYRIZA party looked to be in pole position to win the elections and steer Greece out of the Eurozone.
However, later on that day the tide turned for Sterling as the Bank of England’s quarterly inflation report featured downgraded growth and inflation forecasts leaving the door irrefutably ajar to further quantitative easing increments. Market reaction was predictably blunt to the prospect of additional QE and the Pound sunk by half a cent on Wednesday morning, followed by another half-cent on Thursday as dovish Monetary Policy Member Adam Posen resumed his love affair with the asset purchasing fund. The Euro also found minor support last week as the resilient German economy posted GDP growth of 0.5% which kept the 17-nation bloc out of recession.
Sterling proceeded to lose another half-cent over the weekend despite the vexing news that Moody’s had decided to withdraw the Eurozone’s rescue ring yet ever further away from its periphery nations by cutting the credit rating of 16 Spanish banks. The combination of QE fears and short-term profit taking seems to have led to a GBP/EUR corrective pullback towards 1.2385.
Slowing Consumer Price Index inflation and Retail Sales are likely to leave Sterling unsupported in the immediate future and the BoE Minutes report, released on Wednesday, offers another dose of major downside risk. Eurozone PMI’s are expected to remain relatively stable and so should the Pound to Euro exchange rate as investors await the final act of this modern-day Greek tragedy.
Summary of major upcoming data releases that we think may move the market.
- The Pound to Euro exchange rate reached a three and a half year high on Monday of 1.2443 as general elections in France and Greece left financial markets reeling.
- The Pound rises to a fresh two and a half year high against the Euro and rises to a near 14-year high versus the Dollar
- The Pound rallied to a fresh 9-month high above 1.19 against the Euro exchange rate
- Pound to Euro Exchange Rate Forecast – The Pound is continuing to trade close to three-and-a-half year highs against the Euro
- The Pound to Euro exchange rate reached a 2-week high of 1.2052