Currency analysis: GBPEUR
Key economic indicators
Actual
Trend
Central bank sentiment
0.05%
No change expected short-medium term
Gross domestic product
1%
Expected to improve long-term after QE announced
Consumer Price Index
0.9%
Likely to rise at end of Q4
Unemployment rate
11.3
Could improve if QE filter correctly into economy
Trade balance
€23.4bn
Deficit could increase if exports stay strong
Currency trend: GBPEUR
Insight
The main talking point in the past few months has been Greece and its ongoing negotiations with its
European lenders. June’s meeting with the European Central Bank (ECB) and the International
Monetary Fund has been key to confirming the reforms Greece needs to make, allowing it to receive the
next batch of bailout funds it desperately needs and settle its funding in future. This will enable Greece
to meet payment deadlines and move away from the edge of default. A recent meeting appears to have
eased fears and subsequently GBPEUR has fallen as the chances of a Grexit reduce for now. However,
at this point all we have is rhetoric and the situation could still change. Until a final deal for Greece is
arranged the euro is likely to struggle to find its feet.
Looking at economic data after months of deflation, recent figures have produced positive readings,
refreshing expectations that an economic recovery is achievable. Inflation grew from 0% in April to 0.3%
in May. The ECB had looked at ways in which to move back into inflation, and the quantitative easing
programme, implemented by Mario Draghi and designed to pump billions back into the Eurozone’s
economies, could be starting to bear fruit. Manufacturing growth has also picked up, Purchasing
Managers’ Index figures showed a positive 52.2 in May (anything above 50 shows growth). Spain and
Italy’s exports are in good form, and Sterling’s recent strength against the euro currency has also had a
part to play in the improvement.
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