- Pound Euro Exchange Rate 2016 Forecast to Hold Above 1.17 – But could slip in coming week
- Mid to Long–Term Concerns Weigh – Brexit and populism worries dent Euro
- GBP Forecast: Lack of Pound Support Factors Ahead – Friday’s GDP could offer support however
- EUR Forecast: Can Euro Bounce Back? – Shared currency may be bought after week of poor performance
Pound Euro Exchange Rate 2016 Falls Ahead of Wednesday’s Autumn Statement
The Pound Euro exchange rate 2016 slumped on Tuesday afternoon, extending the losses seen in the morning. This was largely due to concerns about Britain’s long-term deficit issues amid expectations that the UK government would miss its deficit targets significantly in 2016.
Meanwhile, the Euro continued to edge higher in recovery. Demand for the shared currency was limited due to a stronger US Dollar and a lack of upside factors in EUR trade.
However, GBP EUR could continue to fall closer to the week’s opening levels on Wednesday if the Autumn Statement concerns UK markets and the Eurozone’s preliminary November PMIs impress.
(Previously updated 12:40 GMT 22/11/2016)
The Pound Euro exchange rate 2016 slipped from its Monday highs on Tuesday, as traders continued to adjust their positions ahead of Wednesday’s highly anticipated UK Autumn Statement from new Chancellor Philip Hammond.
Analysts do not have high hopes for the UK’s economic outlook with the Brexit process on the horizon. The potential of a detailed and dovish outlook from the UK government for the economy heading into Brexit and beyond left Sterling trade jittery on Tuesday morning.
(Previously updated 16:36 GMT 21/11/2016)
Pound Euro Exchange Rate 2016 Surges on Brexit Transition Hopes
Despite the Euro performing quite strongly on Monday morning. the Pound saw a surge of demand on Monday afternoon that saw GBP EUR easily advance throughout the day.
Sterling’s Monday bullishness was largely due to comments made by UK Prime Minister Theresa May during a speech at this week’s CBI conference.
May aimed to put some business fears at ease by hinting the UK government would attempt to aim for a transitional Brexit.
Rather than the UK suddenly withdrawing from the European Union and all its benefits in 2019, Britain would instead gradually ease away from the EU in the following months and years to allow businesses to more comfortably ease into the new economic situation. This calmed fears of a post-Brexit UK slightly and led to a surge in Pound demand.
As the European session drew to an end, the Pound Euro exchange rate 2016 trended above the key level of 1.17 and its best levels since mid-September.
(Previously updated 12:48 GMT 21/11/2016)
The Pound Euro exchange rate 2016 continued to slip on Monday morning as Brexit concerns returned to weigh on Sterling trade while the Euro recovered from its lows.
Most of the movement in GBP EUR thus far this week has been politically-correlated, with the Pound weakening on new fears about what will happen to the UK economy once the Brexit process is complete and the Euro strengthening on hopes that the French Republican party could beat populist protectionist party, the National Front, in 2017’s election.
News that German Chancellor Angela Merkel would be seeking a fourth term as Chancellor also left the Euro stronger on Monday.
(Published 07:00 GMT 21/11/2016)
Last week’s flat movement looks set to continue in the coming Pound Euro exchange rate 2016 forecast, as upwards factors for both Sterling and the Euro fade. Despite an upwards bias, GBP EUR barely managed to stay above 1.16 until Friday, when Sterling pushed towards a two-month high of 1.17.
Pound Euro (GBP EUR) Trade Supported by Retail Sales Data and Lower Brexit Pressure
Last week was a turbulent one for Pound Euro trade. GBP began the week performing poorly as investors sold it off from highs seen during the week of the US Presidential election.
Traders perceived that the shocking US election win of Donald Trump indicated that Britain’s anti-trade Brexit vote was no longer an outlier vote, which relieved some pressure from the battered currency.
However, Brexit concerns continued to weigh on Sterling as a reportedly leaked cabinet memo indicated the UK government still had no solid plan for how it would leave the European Union.
Later in the week, Sterling was bolstered by an impressive October retail sales report. While analysts warned that retail sales were sure to drop in the coming months as the Pound’s value began to affect consumer goods, traders were impressed by the high yearly growth of 7.4% regardless.
It’s largely because of this retail sales report that the Pound was able to end the week higher against the Euro, as Sterling’s performance weakened again on Friday.
Comments from German finance minister Wolfgang Schäuble that Britain may have to continue paying the EU for as long as a decade even after the Brexit process ends spooked traders slightly, leaving the Pound more volatile.
Euro (EUR) Weakened by Protectionism Fears and ECB’s Dovish Draghi
As many expected, the Euro performed poorly on the foreign exchange market last week due to a wide number of weakening factors.
Lasting shockwaves from Donald Trump’s election as the next US President in the previous week left Eurozone markets concerned about a rising tide of populist political stances like protectionism and how this could threaten the Euro project.
The Euro also suffered from negative correlation with an increasingly strong US Dollar, which continued to benefit throughout the week through hopes for short-term economic boosts and exchange rate hikes under the Trump administration.
With these factors providing an underlying bearishness on the Euro, the shared currency failed to benefit from the week’s decent Eurozone stats which included news that yearly inflation improved to 0.5% in October.
Dovish comments from European Central Bank (ECB) President Mario Draghi also weighed on Euro appetites on Friday. Draghi stated that the ECB’s stimulus measures remained the underlying reason for the Eurozone’s economic recovery and indicated that ultra-loose policy would continue.
Pound Euro Exchange Rate 2016 Forecast to Slip as GBP Bullishness Fades
The Pound Euro exchange rate 2016 forecast could continue to cool in the coming week as investors continue to adjust on GBP EUR values in reaction to the US election result and ongoing Brexit concerns.
Sterling’s lingering bullish sentiment could continue to fade in the next few days. Friday’s session already saw the British currency being sold from its highs and once investors have finished adjusting their positions Sterling may lack the support needed to continue advancing.
December will see the Supreme Court make its decision on whether or not the UK government should be able to activate Article 50 and begin the Brexit without Parliamentary procedure; an event that will be keenly watched by investors.
Last week’s UK inflation and retail sales speculation may also remain on the minds of traders. According to Lord Wolfson, the chief executive of store chain Next, UK consumer prices will be hit in January;
‘I would expect it to begin to come through January next year. And really that inflationary bubble will last all year. But it is a one off bubble, it’s not likely to affect us the following year. It’s not likely to affect retail anything like as much as the devaluation of the Pound.
So the Pound’s fallen 15, 20%. We’re expecting prices at most to go up 5% but I’m expecting a bit less than that.’
However, this doesn’t mean the Euro is home free either. As December’s Italian constitutional referendum approaches, the possibility of a populist result will cause Eurozone traders to stay wary on the shared currency and its uncertain future.
Key datasets due next week include preliminary November PMIs for the Eurozone, as well as Q3 growth stats for Britain which could also affect the Pound Euro exchange rate 2016 forecast.
