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2016 Pound Sterling Euro Exchange Rate Tests 1.18 Highs after Autumn Statement

  • 2016 Pound Sterling Euro Exchange Rate above 1.17 – Struggles to break key 1.18 level
  • Sterling Falls on Autumn Statement Jitters – UK Chancellor Hammond’s first budget
  • Autumn Statement Lacks Surprises – Economic outlook matches expectations
  • EUR Update: Germany’s Q3 GDP Results Meet Expectations -Euro fails to benefit
  • Forecast: Sterling to Influence Friday Movement – UK’s Q3 GDP scores ahead

2016 Pound Sterling Euro Exchange Rate Tests Key 1.18 Level

The 2016 Pound Sterling was easily able to hold most of its Wednesday gains throughout Thursday as traders held sturdy on the Pound against a weak Euro. GBP EUR struggled to hold above the key level of 1.18, but may be able to break through any resistance if Friday’s UK ecostats impress.

Friday’s European session will see the publication of the second preliminary Q3 Gross Domestic Product (GDP) figures for the UK. Analysts generally expect these will match the first preliminary prints of 0.5% quarter-on-quarter and 2.3% year-on-year.

GBP EUR could advance if these impress, trend flatly if they meet expectations or fall if they disappoint. However, as Thursday’s Eurozone ecostats failed to give the Euro much support it’s unlikely the Euro will suddenly become bullish on Friday which should mean an easy week of advances for GBP EUR.

(Previously updated 12:42 GMT 24/11/2016)

The 2016 Pound Sterling Euro exchange rate held near its best levels on Thursday but trended largely flatly after testing the key resistance level of 1.18 on a few occasions.

Despite another optimistic set of ecostats from the Eurozone, the Euro struggled to sustain any recovery attempts. Germany’s final Q3 growth results met expectations in every print, leaving traders largely uninterested.

Lasting strength in the US Dollar also weighed on Euro demand despite a lack of new supportive factors for Sterling since Wednesday’s session.

(Previously updated 16:31 GMT 23/11/2016)

2016 Pound Sterling Euro Exchange Rate Surges to New November High

Despite Tuesday jitters pushing the 2016 Pound Sterling Euro exchange rate down from its Monday highs, GBP EUR made a solid recovery on Wednesday after the day’s Autumn Statement contained less surprises than feared.

Traders spent Tuesday and Wednesday morning preparing for the possibility of a bearish surprise from UK Chancellor Hammond, but the Autumn Statement was generally surprise free and fell in line with analyst expectations.

Markets breathed a sigh of relief as a result and bought back into the Pound. Wednesday’s Sterling relief rally continued as the European session drew to an end, with GBP EUR nearing the key level of 1.18.

The day’s Eurozone data failed to provide the Euro with any meaningful support, despite Eurozone PMIs beating expectations in every print.

(Published 07:00 GMT 23/11/2016)

The 2016 Pound Sterling Euro exchange rate struggled to hold its Monday highs throughout Tuesday’s European session, instead slipping slightly as the shared currency’s recovery attempts continued.

GBP EUR climbed from opening levels of above 1.16 on Monday to highs above 1.17. While the pair failed to break the key level of 1.18, it held near 1.17 throughout Tuesday and near its best levels since mid-September.

Pound (GBP) Bullishness Weakened by Autumn Statement Jitters

The general trend of Pound movement thus far this week has been limp, despite the British currency surging across the board on Monday.

Monday’s session saw UK markets calmed by comments from UK Prime Minister Theresa May, who stated the UK government may aim for a transitional Brexit rather than an immediate ‘cliff-edge’ Brexit.

This would mean the UK sees a gradual withdrawal from the European Union and its trade benefits, which could help ease UK businesses into the new post-Brexit economy.

However, despite this Monday bullishness the Pound slumped on Tuesday morning and extended its losses in the afternoon, as jitters towards Wednesday’s Autumn Statement from UK Chancellor Philip Hammond took hold of markets.

While Tuesday’s public sector net borrowing scores came in with a better-than-expected low score of £4.301b, analysts reminded markets after the publication that Britain’s deficit targets for 2016 were still far from reach.

Martin Beck, economic advisor from EY ITEM Club stated;

‘This still leaves the Government behind schedule in terms of achieving the OBR’s full year forecast. If this trend continues over the remaining five months of the year then borrowing would overshoot by around £11bn.’

This left traders increasingly anxious about Wednesday’s Autumn statement and the Pound dropped further on Tuesday afternoon. Despite this, other analysts suggested that the better-than-expected borrowing results would be good news for Hammond and could lead to a more optimistic tone.

Euro (EUR) Continues to Edge Away from Lows

After performing poorly for over a week on concerns of rising populist politics such as protectionism across the Eurozone after this year’s Brexit and Trump votes, the Euro stabilised this week and has recovered slightly as traders buy it up from its cheapest levels.

The shared currency has also benefitted from developments in the Eurozone’s major upcoming political events, including 2017’s French and German elections.

German Chancellor Angela Merkel confirmed at the beginning of the week that she would stand for a fourth term in 2017’s German election, bolstering hopes that Germany could hold back protectionist populism.

Over in France, the success of François Fillon in the French Republican party’s primary elections thus far have seen analysts and the media calling him a new favourite to win against Marine Le Pen and her protectionist National Front party.

However, fears of rising populism and the potential of weaker trade ties with the US under President-elect Donald Trump have left the Euro’s underlying trends weak, meaning its recovery on Tuesday has been largely due to weakness in Sterling.

2016 Pound Sterling Euro Exchange Rate Forecast: Hammond’s Autumn Statement in Focus

Wednesday’s session will be vital for the 2016 Pound Sterling Euro exchange rate, as traders will be reacting to the Eurozone’s preliminary November PMIs from Markit as well as the UK’s Autumn budget statement.

As the Euro has lacked any lasting upward factors so far this week, November’s PMIs could give support to EUR trade in the coming days if they impress markets and show that Eurozone activity continues to improve.

If these results disappoint, GBP EUR could more easily return to its Monday highs and end the week stronger as investors will revisit concerns of further stimulus from the European Central Bank (ECB).

The day’s main event however will of course be Britain’s Autumn Statement from Chancellor Philip Hammond. As the first budget statement since the Brexit vote and the first statement of the new Chancellor, all eyes are on Hammond.

Investors expect Hammond will set the tone for the UK’s economic outlook in both the short and long-term future.

If Hammond plays down the economic prospects of a post-Brexit UK, the Pound is likely to see additional pressure on Wednesday that could take GBP EUR closer to the week’s opening levels. A more optimistic tone from Hammond could help the British currency hold its ground however.

Ultimately the underlying trend for the 2016 Pound Sterling Euro exchange rate is lower and could see GBP EUR trending flatly later in the week despite Monday’s highs.