- Euro Pound 2016 Exchange Rate Near 0.86 – Worst levels since September and struggling to recover
- Populism Worries Continue to Weigh on Euro – Fears that protectionism could damage Eurozone
- German Growth Disappoints – Euro recovers slightly regardless
- October’s UK Inflation Slows – Sterling value undermined by Brexit news
- Forecast: Trump Bullishness Fading? – GBP could continue to shed gains
Euro Pound 2016 Exchange Rate Slips Back on Wednesday
After advancing on a weak Pound throughout Tuesday trade, Sterling easily recovered overnight and was able to hold that recovery throughout Wednesday’s European session.
This was despite a number of factors weighing on the Pound throughout Wednesday, most of which concerned how the Brexit process could affect the UK’s economy in the mid to long-term future.
For example, Britain’s September unemployment stats were impressive, with unemployment falling to an 11-year-low of 4.8% between July and September.
Despite this, October’s jobless claim results surprisingly came in well below expectations. Not only did October’s score miss 2,000 forecasts by coming in at 9,800, September’s score was revised from 700 to a considerably worse 5,600.
This led some analysts throughout the day to suggest that British employment could be set for a tough few months, which prevented the Pound from pressing EUR GBP even lower on Wednesday.
(Previously updated 14:15 GMT 16/11/2016)
The Euro Pound 2016 exchange rate had given up its Tuesday gains by Wednesday morning and continued to trend in a relatively tight range near the week’s lows throughout the morning.
Populism concerns continued to weigh on Euro demand with Italy’s constitutional referendum approaching and polling figures began to indicate that Italian Prime Minister Matteo Renzi’s stance on the referendum was in a difficult position.
(Previously updated 16:35 GMT 15/11/2016)
Euro Pound 2016 Exchange Rate Rebounds from Lows on Tuesday
Tuesday’s European session saw the Euro Pound 2016 exchange rate make its best gains in over a week as the Euro took advantage of a Sterling selloff and rebounded from its lowest levels.
Weakened by last week’s Trump bullishness as well as concerns that protectionist politics would become more popular in Eurozone countries, the Euro had sustained some relief by the end of the day’s European trade.
Euro exchange rates were little-affected by the day’s Eurozone ecostats as investors focused on buying the shared currency from its lows despite mixed results. German growth came in below expectations while Italy’s Q3 Gross Domestic Product (GDP) scores impressed.
The Eurozone’s overall Q3 GDP figures were on track to score 1.6% as expected, while ZEW’s November Eurozone economic sentiment survey improved from 12.3 to 15.8.
(Previously updated 12:45 GMT 15/11/2016)
The Euro Pound 2016 exchange rate performed far stronger on Tuesday than it had done on Monday – or any day since the US election – as investors piled into the Euro and bought it up from its recent lows.
Sterling, on the other hand, was undermined on Tuesday by disappointing October consumer prices. Year-on-year inflation was revealed to have slowed to 0.9%, dashing hopes from markets for inflation to show more signs of being affected the Pound’s low value.
A memo reportedly leaked from the UK government stating that there was still no concrete plan on how to handle the Brexit process also weighed heavily on Sterling on Tuesday, despite Downing Street stating it did not recognise the note.
(Published 07:00 GMT 15/11/2016)
The Euro Pound 2016 exchange rate saw largely flat movement on Monday as Sterling gave up the Trump-inspired bullishness seen in the latter half of last week. Demand for the Euro remained low however, with no signs of a recovery effort.
EUR GBP experienced one of its worst weeks in months last week, losing almost three pennies and falling from 0.89 to nearly as low as 0.85. This is the lowest value for the exchange rate since September.
Euro (EUR) Weighed Down by Perceived Threat of Protectionism to Eurozone
Last week’s US election result had a direct impact on the foreign exchange market, with traders still actively reacting to news of the incoming Trump Presidency and what it could mean for economies around the globe.
With the US being the biggest economy in the world and the Eurozone its biggest trade partner, the election of protectionist Donald Trump has sent shockwaves of worry about the future of US-Eurozone trade across markets.
The Euro shares a close correlation with the US Dollar due to the Eurozone’s trade relationship with the US. As a result the Euro has become weaker in the last week due to the surging US Dollar.
However, a more long-term concern also weighs on Euro trade – the possibility that populist politics like protectionism and nationalism could continue to rise in other major economies as they had done in Britain and the US over the last year.
The possibility of this affecting the Eurozone has been perceived as a huge threat to the Euro project. A nation deciding to pull out of the Eurozone and returning to its own currency has been seen as a major destabilising element to the Euro bloc’s economy. Martin Van Vliet, rates strategist from ING, stated;
‘We’ve had an anti-establishment vote in the UK, one in the US and now everyone’s looking at the Eurozone and thinking, where do we have elections next year? Yes, France, so people are trying to zoom in on those countries that may be at risk’
Pound (GBP) Bullishness Wears Thin after Last Week’s Rally
The Pound soared against the Euro last week, seeing one of its best performances in months as Brexit-related pressure on the currency was relieved considerably on the surprise of Trump’s election win.
Trump and his advisers were quick to call Britain one of the US’ closest ‘friends’ and indicated that Britain may be first in line for a Trump administration trade deal.
Hopes of stronger UK-US trade bolstered demand for the Pound last week, as this took pressure off the Brexit-battered Pound and led UK markets to speculate that the UK government now had a stronger platform for Brexit negotiations with the EU.
However, some investors perceived the Pound as having been overbought last week, leaving the British currency a lot limper on Monday. As a result, it struggled to push EUR GBP down much further than it had done.
Euro Pound 2016 Exchange Rate Forecast: Further EUR GBP Falls Likely
Concerns surrounding the rise of protectionist populism are likely to continue weighing on the Euro Pound 2016 exchange rate in both a short-term and long-term outlook.
With key Eurozone votes ahead including a constitutional referendum in Italy next month and French and German elections in 2017, the threat of populism affecting the Eurozone project is likely to linger on the minds of Euro investors for months to come.
There is an upside for Eurozone traders however. The current Euro downtrend is likely to offer some relief to the European Central Bank (ECB) as a lower-valued shared currency could make its quantitative easing (QE) plans smoother and help to boost inflation.
Tuesday will see the publication of multiple key Eurozone ecostats, including Q3 Gross Domestic Product (GDP) results from Germany and Italy.
If these fail to meet expectations, the Euro’s current downtrend is likely to worsen. On the other hand, strong results could offer the single currency some support. Britain’s October Consumer Price Index (CPI) scores will also be published on Tuesday morning.
Analysts also perceive that the Pound still has further to climb. According to strategists from Credit Agricole;
‘Considering that overall short positioning remains elevated, further corrective sterling upside seems likely in the short term, We favour upside against the Euro, where positioning is broadly balanced.’
Due to Euro weakness, the likelihood of corrective trading and Trump taking the spotlight away from Brexit concerns, the Euro Pound 2016 exchange rate is forecast to the downside for the coming days.
