GBP/EUR Exchange Rate Struggles Despite Tsipras Shenanigans

The pound to euro exchange rate (GBPEUR) remains anchored in familiar territory with a break above the 1.41 level looking increasingly difficult to achieve.

In fact, the pound sterling has been one of the worst performers over the course of the past 24 hours with a poor set of manufacturing figures from the ONS ensuring it is down across the board.

The GBP-EUR conversion is seen trading at 1.4095 at the time of writing.

Our cumulative high-street bank offer on international payments is quoting 1.3699 while independent providers are tighter on their margins and delivering payments at about 1.3925.

“Mixed news today on Britain’s factory sector did little to slow the pound’s fall as industrial output unexpectedly rose (0.4 percent) but manufacturing output surprisingly fell (-0.6 percent)” notes Joe Manimbo, a currency analyst with Western Union.

Against the dollar the pound is faring particularly poorly - the rate has hit a one month low after achieving 1.5439. The GBPUSD is a whopping one percent lower on a day-to-day basis.

When understanding why the currency market reaction has been so negative we must take note of the fact that markets had priced in the sterling exchange rate complex for the manufacturing data to deliver growth of 1%.

The reality was rude - a fall of 0.6% forced the sell buttons into action.

Foreign exchange markets are betting that the Bank of England may delay raising interest rates based on the data.

Currently expectations see the first rate hike of the impending cycle commencing in May of 2016. If this kick-off is delayed expect the GBP to struggle over coming weeks.

Concerning the technical outlook, the pound euro exchange rate is locked in a stubborn range formed by 1.42 at the top and 1.40 at the bottom.

I am confident that 1.40 will prove supportive to the spot market over coming days as it is hard to see what could prompt an improvement in sentiment towards the euro such that GBP-EUR breaks below such a formidable barrier.

Any weakness in GBPEUR will be seen by many in the market as a good opportunity to buy ahead of an inevitable recovery.

Euro Under Pressure as Greece Comes to the Table With Nothing

GBP is being outperformed by the euro despite the Greek circus showing no signs of closing up shop.

“It appears the absence of Yanis Varoufakis has not reduced Greece’s ability to annoy its creditors. Turning up in Brussels without fresh proposals and instead promising them tomorrow is perhaps the best way to ensure that any new ideas get a cold reception. If anything sends a message that Alexis Tsipras is not serious about negotiations, then this is it,” says Chris Beauchamp.

Beauchamp believes Greece’s government now appears intent on leaving, “and if they carry on in this fashion, the rest of the eurozone will be happy to show them the door.”

With the EUR-USD breaking below 1.10 on the latest developments we get the sense that further declines may occur.

In this environment the USD remains supreme courtesy of its safe haven status and the promise of higher interest rates being imposed by the Federal Reserve as soon as September.

We could well see a recovery in GBP-EUR over coming days based on developments Greece, but we don't have much confidence that the ceiling at 1.42 will be cracked.