- British Pound Euro Exchange Rate Near 1.17 – Briefly touches multiweek highs on Wednesday
- Sterling Strong on UK Trade Hopes – But slips on Tuesday after Supreme Court news
- Supreme Court Decision Announced – High Court ruling will be upheld
- Forecast: UK Growth Results Due Thursday – How did UK economy perform in Q4 2016?
British Pound Euro Exchange Rate Continues to Advance on Wednesday
On Wednesday afternoon, the British Pound Euro exchange held above the key level of 1.17 as Sterling demand continued to improve.
The primary reason for Sterling’s strength throughout the day was primarily anticipation for the UK government’s white paper on the Brexit plan. Markets hope the report will go into greater detail on what to expect from the Brexit process.
Sterling was also able to capitalise on a weakened Euro.
Demand for the shared currency slumped on Wednesday afternoon following a comment from Ted Malloch, who stated he would bet against the shared currency and that it may even collapse in the next 18 months.
As Malloch is tipped to be US President Trump’s top pick as US ambassador to the EU, these comments were quite influential and the Euro fell on Wednesday afternoon.
[Previously updated 12:57 GMT 25/01/2017]
After a brief dip on Tuesday, the British Pound Euro exchange rate was back in action on Wednesday and at the time of writing had just broken the key 1.17 level for the first time since the first week of January.
Demand for the Pound was improved further after it was confirmed by UK Prime Minister Theresa May that the UK government would be publishing a ‘white paper’ Brexit plan soon.
The Euro, on the other hand, allowed the Pound to advance more easily as the day’s Eurozone ecostats disappointed investors.
According to IFO’s latest German business confidence survey, business climate unexpectedly worsened in January from 111 to 109.8 and expectations fell to 103.2.
[Previously updated 09:02 GMT 25/01/2017]
Supreme Court Upholds High Court Ruling – Why Did it cause the British Pound Euro Exchange Rate to Drop?
Towards the end of Tuesday’s European session, the British Pound Euro exchange rate had recovered from its worst daily levels and was once again above 1.16.
Sterling’s losses earlier in the day had been surprising in that all forecasts had pointed to GBP gains if the Supreme Court upheld last year’s high court ruling.
The primary reason for the currency’s drop earlier in the day was concern that Scotland would hold another independence referendum.
While this and other Brexit concerns will continue to be persistent downside factors in GBP trade in the coming months, investors became a little more optimistic in the afternoon as UK Brexit Secretary David Davis indicated a Brexit plan may be given to MPs within days.
This, as well as mixed demand for the Euro throughout the day, allowed GBP EUR to recover.
[Previously updated 12:48 GMT 24/01/2017]
Towards Tuesday afternoon the British Pound Euro exchange rate slipped further from its daily highs and had lost around half of the Monday’s gains.
The UK Supreme Court ruling caused markets to ask new questions about the Brexit, such as increasing speculation of a second Scottish independence referendum. This possibility weighed heavily on Sterling.
Over in the Eurozone, January’s preliminary PMI results from Markit disappointed slightly by just missing the forecasts analysts expected.
The Eurozone’s composite PMI for January was predicted to improve from 54.4 to 54.5, but instead slipped to 54.3.
However, as the figures remained sturdy and relatively close to the predicted level of economic activity, demand for the Euro was solid enough to extend GBP EUR’s morning losses.
[Previously updated 11:51 GMT 24/01/2017]
The British Pound Euro exchange rate experienced fairly significant swings as investors responded to the Supreme Court decision, but contrary to predictions the desired outcome actually left GBP weaker.
As expected, the Supreme Court upheld the High Court decision from late last year – the Government will not be able to activate Article 50 without the ratification of Parliament.
The Press Summary for the decision stated; ‘The Supreme Court by a majority of 8 to 3 dismisses the Secretary of State’s appeal (Lord Neuberger, Lady Hale, Lord Mance, Lord Kerr, Lord Clarke, Lord Wilson, Lord Sumption and Lord Hodge in the majority with Lord Reed, Lord Carnwath and Lord Hughes dissenting). In a joint judgment of the majority, the Supreme Court holds that an Act of Parliament is required to authorise ministers to give Notice of the decision of the UK to withdraw from the European Union. Each of the dissenting justices gives a separate judgment.
On the devolution issues, the court unanimously concludes that neither section 1 nor section 75 of the NIA [Northern Ireland Act] is of assistance in this case, and that the Sewel Convention does not give rise to a legally enforceable obligation.’
The Pound’s losses were inspired by the fact that the governments of Scotland, Ireland and Wales won’t be given the opportunity to vote on Article 50. This latest development has increased the odds of Scotland pushing for a second independence referendum.
The Pound Euro exchange rate remained trending in the region of 1.16 but did dip to 1.1577.
[Published 06:30 GMT 24/01/2017]
The British Pound Euro exchange rate edged higher on Monday and could reach its best levels in weeks on Tuesday if the UK Supreme Court upholds last year’s High Court decision on Article 50.
Economists and investors currently expect the High Court ruling to be upheld – although a surprising result could send GBP tumbling across the board.
GBP EUR tested the key level of 1.16 multiple times yesterday. Tuesday’s Supreme Court judgement could be just what the pair needs to hold above that level going forward. Could Pound Euro rally above 1.17 this week? That remains to be seen, but whatever the outcome Pound movement is on the horizon.
Pound (GBP) Benefits from UK Supreme Court Anticipation
Demand for the Pound was solid on Monday, with the British currency making some modest advances against the sturdy Euro.
The Pound benefitted throughout Monday’s European session from excitement ahead of Tuesday’s UK Supreme Court judgement on whether to uphold last year’s High Court decision that Article 50 must be activated through Parliament.
The UK government had previously intended to activate Article 50 and begin the Brexit process itself with no input from MPs, until a court challenge was raised over the legality of beginning the Brexit this way.
Investors expect the Supreme Court will uphold the High Court’s decision, which will lead to a surge of hopes that UK MPs will vote for full single market access to be a part of Brexit negotiations.
Markets also anticipate the judgement may contain further details of how exactly the Brexit process must be activated. MUFG currency strategist Lee Hardman stated;
‘It’s not just a case of which way they rule – the exact wording of what sort of involvement parliament will have will be important.’
Anticipation for this possibility, as well as a US Dollar (USD) selloff that occurred on Monday, bolstered Sterling demand throughout the day.
Euro (EUR) Fails to Hold Against Sterling’s Advances
The Supreme Court excitement left Sterling the winner by the end of the day’s European session, even though the Euro was supported elsewhere by the latest Trump jitters.
US President Donald Trump left USD traders anxious due to a lack of new details on his plans for US fiscal policy after his first weekend in the role.
He also appeared to be firming his anti-globalisation stance and begun the motions needed to sever the TPP trade deal as well as renegotiate the key North American Free Trade Agreement (NAFTA) which allows free trade between the US, Mexico and Canada.
As a result, investors sold off the US Dollar (USD), allowing rivals like the Euro to benefit.
However, demand for the shared currency was held back by lingering concerns about the Eurozone after dovish statements from European Central Bank (ECB) President Mario Draghi.
Draghi stated last week that underlying inflationary pressure in the Euro bloc remained subdued.
He also made a speech on Monday in Torino, Italy, where he urged for international cooperation to help heal individual nations.
British Pound Euro Exchange Rate Forecast: Supreme Court Decision Ahead
The main event during Tuesday’s European session will doubtlessly be the UK Supreme Court’s decision on whether or not to uphold the High Court’s Article 50 decision.
If the decision is upheld as investors have bet, the Pound is likely to see a sturdy short-term improvement. According to Naeem Aslam from Think Markets UK;
‘The reason will be that parliament will have much more to say in triggering Article 50 and most importantly, it fades the chances of Scotland prompting another referendum. Scotland can no longer play the card that the Brexit is against their will if the vote comes to the Parliament.’
Fears of a Pound crisis will fall if investors perceive a lower chance of a second Scotland independence referendum.
However, if the Supreme Court surprises and upholds the government’s position, Sterling could plunge. While markets are more confident on the UK government’s Brexit plan after last week’s speeches, this would still disappoint investors considerably.
Tuesday’s session will also see the publication of various key ecostats. Markit will publish its preliminary January Eurozone PMI figures and December UK public sector borrowing results will also come out.
Later in the week more vital UK ecostats will be published, including Q4 Gross Domestic Product (GDP) figures.
If these figures impress and Supreme Court makes the expected judgement, the British Pound Euro exchange rate is likely to advance this week.
