Homepage » Brexit » 2016 GBP EUR Exchange Rate Falls as Autumn Statement Bullishness Fades

2016 GBP EUR Exchange Rate Falls as Autumn Statement Bullishness Fades

  • 2016 GBP EUR Exchange Rate Near 1.17 – Falls from weekly highs
  • Autumn Statement Leaves Pound Strong – Gloomy Brexit forecasts were largely expected
  • Final Q3 German Growth Solid – But fails to impress Euro traders
  • Update: UK’s Q3 Growth Stats Meet Expectations – Sterling slips regardless
  • Forecast: Quiet Data Week Ahead – GBP strength could continue to fade

2016 GBP EUR Exchange Rate Falls Towards 1.17 on Friday

After surging on Wednesday and holding its highs on Thursday, the 2016 GBP EUR exchange rate fell towards the end of the week as investors took profit from Sterling’s highs and allowed the Euro to advance.

Sterling ultimately failed to capitalise on the day’s UK data, continuing to tumble lower as the week drew to an end. The Euro also benefitted from a weaker US Dollar as Friday’s US ecostats disappointed traders.

However, despite Sterling’s weakness and the Euro’s recovery attempts GBP EUR still looked to end the week above the level of 1.17 and the week’s opening levels of 1.16.

Next week the Euro is likely to influence 2016 GBP EUR movement due to the sets of Eurozone data due throughout the week.

(Previously updated 12:40 GMT 25/11/2016)

The 2016 GBP EUR exchange rate slipped on Friday as its Autumn Statement strength began to fade and traders took profit in selling the Pound from its best levels.

GBP EUR ultimately failed to hold above the key level of 1.18 and by midday on Friday was closer to the level of 1.17 once again.

The day’s UK data may have helped Sterling hold its ground slightly as the second preliminary Q3 Gross Domestic Product (GDP) results came in at 0.5% quarter-on-quarter and 2.3% year-on-year.

(Previously updated 16:39 GMT 24/11/2016)

2016 GBP EUR Exchange Rate Tests Key Resistance Level of 1.18

Thursday’s Eurozone ecostats failed to provide the shared currency with any significant support throughout the day, allowing the 2016 GBP EUR exchange rate to easily hold its ground near the pair’s best levels since early-September.

Germany’s final Q3 Gross Domestic Product (GDP) results met expectations, coming in at 0.2% quarter-on-quarter and 1.7% year-on-year. This indicated solid growth for the Euro bloc’s biggest economy.

However, the day’s other German ecostats were mixed. Euro demand was weighed slightly by the IFO’s underwhelming German business climate and expectations results for November, while GfK’s German consumer confidence survey for December unexpectedly improved to 9.8.

Friday is unlikely to inspire much Euro movement, but if Britain’s second Q3 growth prints beat expectations (or come in below expectations) the Pound is likely to drive 2016 GBP EUR exchange rate movement towards the end of the week.

(Previously updated 12:55 GMT 24/11/2016)

Despite some of the gloomy forecasts of UK Chancellor Hammond’s Autumn Statement, investors were overall cheered by the lack of bearishness in the statement and this allowed the 2016 GBP EUR exchange rate to solidly recover all of Tuesday’s losses and even continue advancing.

During Thursday’s European session, UK traders held their high positions on the Pound and were optimistic on the Chancellor’s plans to spend large sums on infrastructure and innovation in the UK over the next few years.

The Euro struggled to hold its ground against the Pound’s advances due to negative correlation with a strong US Dollar. This week’s Eurozone ecostats, even the sturdy ones, failed to offer the shared currency any meaningful support.

(Published 07:00 GMT 24/11/2016)

The 2016 GBP EUR exchange rate recovered slightly in Wednesday’s European session as traders reacted to the UK Autumn Statement. The statement contained little in the way of surprises and most of the bearish news was largely expected by traders, giving Sterling some relief.

GBP EUR continues to trend above the week’s opening levels of 1.17, despite weakening briefly on Tuesday.

Pound Euro (GBP EUR) Sees Relief after Autumn Statement

Sterling trended poorly throughout Tuesday’s session and on Wednesday morning as investors adjusted their positions on bearish expectations for the highly anticipated Autumn Statement from UK Chancellor of the Exchequer Philip Hammond.

Traders were particularly anxious on Tuesday about the UK’s seemingly deepening account deficit after analysts saw Tuesday’s better-than-expected borrowing figures and stated that the UK government was still likely to miss deficit targets significantly.

As a result of this analysis, markets began to expect a bearish Autumn Statement. Traders were also jittery as this would be UK Chancellor Hammond’s first budget statement since becoming Chancellor and were unsure of what to expect in comparison to his predecessor George Osborne.

However, when the Autumn Statement came and went on Wednesday markets were generally relieved as most of the gloomy Brexit-related forecasts from the statement were largely predicted beforehand.

The key takeaways from the statement were the cancellation of rises in fuel duty, a huge £23b to be spent on innovation and infrastructure, confirmation that there would be no further welfare cuts this Parliament, an increase in insurance premium tax and lastly news that the Autumn Statement would be abolished in favour of an Autumn Budget.

As expected, Hammond also laid out a weaker outlook for taxes and the economy due to the spending needed for the Brexit process. The government no longer expects the current account to return to a surplus by 2021.

The Office for Budget Responsibility (OBR) stated that a lot of this weaker outlook was due to the Brexit;

‘Public sector net borrowing is now expected to fall more slowly than we forecast in March, primarily reflecting weak tax receipts so far this year and a more subdued outlook for economic growth as the UK negotiates a new relationship with the European Union.’

Euro (EUR) Fails to Benefit from Stronger Eurozone Economic Activity

While some of the underlying anxiety on the Pound was relieved on Wednesday, demand for the Euro continued to be weighed down by multiple ongoing factors.

Concerns that the popularity of protectionist politics would rise in the Eurozone next year, as well as the possibility of the European Central Bank (ECB) extending its monetary stimulus measures in December’s policy meeting weighed heavily on the Euro’s Wednesday movement.

As a result, the shared currency failed to benefit from Wednesday’s preliminary November PMIs from Markit, despite most of the key prints coming in above expectations.

France’s economic activity beat expectations, with its Composite print improving from 51.6 to 52.3 and beating predictions of 51.9. Germany’s Services PMI also beat expectations, coming in at 55.

While Germany’s Manufacturing and Composite PMIs disappointed slightly at 54.4 and 54.9 respectively, this didn’t keep the Eurozone’s overall PMIs from beating expectations in every print.

Eurozone Manufacturing was on track to improve from 53.5 to 53.7, Services from 52.8 to 54.1 and the Composite figure from 53.3 to 54.1.

2016 GBP EUR Forecast: Pound Trade to Calm while Euro Recovery Attempts Continue

Thursday’s session could offer the Euro some more support, which could knock the 2016 GBP EUR exchange rate lower if the data beats expectations.

Germany’s final Q3 Gross Domestic Product (GDP) results are due for publication and if these figures impress or beat preliminary figures it’s possible the Euro will see an upward trend against the Pound in the day’s early European trade.

However, as Wednesday’s Eurozone PMIs had little influence on Euro exchange rates it’s also highly possible that Thursday’s ecostats will be unable to spur movement into the shared currency.

Thursday’s session will also see the publication of the IFO’s German business confidence results for November, as well as the GfK’s consumer confidence survey for December.

In terms of UK data, the BBA will publish its October house loans results but, as traders will likely continue adjusting their positions on Wednesday’s Autumn Statement, this may have little effect on Pound exchange rates.

As it stands, the 2016 GBP EUR exchange rate is likely to slip back towards the week’s opening levels slightly but a weak Euro could allow GBP EUR to end the week higher.