- British Pound Euro Exchange Rate Holds at 1.17 – But pair falls from highs of 1.18 on GDP outlook
- UK Service Sector Holding Up Economic Growth – Other factors fail to impress
- GBP Forecast: Anticipation for Weekend’s Trump Meeting – UK PM May to meet Trump
- EUR Forecast: Slew of Eurozone Data Due Next Week – Includes consumer confidence and German inflation
British Pound Euro Exchange Rate Slumps Throughout Friday Trade
Towards the end of Friday’s European session, the British Pound Euro exchange rate fell closer to the region of 1.16 and further away from the highs seen on Thursday.
Despite falling at around -0.6% throughout the day GBP EUR looked set to end the week’s European session comfortably above the level of 1.17 after having gained over a cent.
Sterling was sold off on profit-taking stances ahead of the highly anticipated meeting of Theresa May and Donald Trump.
As May focused on the importance of cooperation and NATO during her speech to Republicans on Thursday, some investors became concerned that she may clash with the more protectionist Trump. GBP investors are certain to react to the outcomes of the meeting when markets open on Monday.
[Previously updated 13:00 GMT 27/01/2017]
While it continued to trend comfortably above the level of 1.17, the British Pound Euro exchange rate fell over -0.3% from its weekly highs on Friday morning.
Increased market jitters about 2017 UK growth as well as this weekend’s upcoming meeting between UK Prime Minister Theresa May and US President Donald Trump weighed on Sterling demand throughout the day.
As for the Euro, Friday’s French and Italian consumer confidence results did little to improve the shared currency’s movement. However, the Euro was able to easily benefit from the Pound’s weakness.
[Previously updated 08:46 GMT 27/01/2017]
The British Pound Euro exchange rate slipped on Thursday despite anticipation for the Brexit ‘white paper’ and upcoming UK-US talks, as markets grew concerned that the resilient UK services sector would be hit by the weaker value of the Pound.
Sterling dropped by 15% in the wake of Brexit, and analysts anticipate that this shift will continue driving consumer price pressures higher and weighing on personal spending habits. There were also concerns about the extent to which the UK’s economic resilience is reliant on the services sector.
GBP EUR began the week trending at around 1.15 and on Thursday hit a multi-week high. The pair neared the key level of 1.18 before slipping but comfortably trended above 1.17 for most of the day.
Pound (GBP) Slips on Renewed Economic Concerns
Sterling has performed well overall in the past week. The British currency has been supported by the Supreme Court ruling that Article 50 must be activated through Parliament, as well as news that the UK government would publish a Brexit ‘white paper’ to help make the vote smoother for MPs.
However, on Thursday demand for the Pound was dampened slightly due to Britain’s Q4 Gross Domestic Product (GDP) figures.
Markets initially found the report encouraging as UK growth beat expectations on the quarter. Year-on-year growth remained at 2.2% and avoided a slip to 2.1%, while quarter-on-quarter growth held at 0.6% and beat the forecast 0.5%.
However, alongside the report came the news that Britain’s services sector was more or less propping up this growth itself.
The services sector includes retail, travel and healthcare. Throughout Q4, retail and travel were particularly strong factors behind the UK’s economic growth. According to Kathleen Brooks from City Index;
‘Every silver lining has a cloud… Sullying these figures are some uncomfortable truths about the state of UK growth, which is looking dangerously unbalanced propped up entirely by services.
… The service sector was strong, but other sectors performed worse than expected, which… does not bode well for growth going forward.’
Due to grim forecasts like this, the Pound was sold on Thursday and as a result GBP EUR was unable to hold onto its best levels.
Euro (EUR) Slips on Mixed Forecasts
Despite the Pound’s own weakness on Thursday, GBP EUR fluctuated due to weakness in the Euro.
Various factors have weighed on the shared currency this week, including underwhelming Eurozone ecostats and renewed concerns about the long-term health of the Euro bloc.
Wednesday evening saw Ted Malloch, tipped to be Trump’s pick for US ambassador to the EU, state that the Euro had the potential to collapse within the next 18 months.
Malloch advised investors to short the Euro as he perceived that the currency was in demise and would only get worse.
This view contrasted with other analysts, including Tan Teck Leng from UBS who believed the Euro could hit 1.20 against the US Dollar in the coming year and advised traders to go long on the shared currency.
Due to the widely contrasting view on the Euro among analysts, the shared currency fluctuated and Thursday’s data was not enough to give the currency significant support.
GfK published its German consumer confidence survey for February on Thursday morning. While the figure was predicted to edge higher from 9.9 to 10, it beat expectations and came in at 10.2. Spain’s Q4 2016 unemployment rate also improved to 18.63%.
British Pound Euro Forecast: Markets to Push GBP Higher Before the Weekend?
While Friday’s economic calendar will be relatively quiet for Britain and the Eurozone, the British Pound Euro exchange rate is still likely to advance as investors anticipate a meeting between US President Donald Trump and UK Prime Minister Theresa May.
May will be the first world leader to meet Trump over the weekend and markets are hoping the two will discuss the potential for stronger UK-US trade ties once the Brexit is over.
Trump has previously indicated that he values Britain’s ties with US history and sees the nations as special allies. This has caused markets to become highly excited for potential trade deals in the future.
In terms of data, some relatively low influence Eurozone results will be published on Friday. They will include Friday’s January consumer confidence results, as well as Italy’s, and German import prices for December.
Ultimately however, the British Pound Euro exchange rate is highly likely to end the week over a cent above its opening levels as investors will spend Friday’s session firming on the Pound ahead of the weekend.
