- Pounds Euros Exchange Rate Holds Above 1.18 – Sterling bolstered by Brexit news
- Euro Struggles Despite Solid German Inflation – Populism fears take hold once more
- GBP Update: Soft Brexit Looks Possible – Comments from Brexit Secretary improve optimisim
- EUR Forecast: Eurozone Political Events This Weekend – Italian referendum in focus
Pounds Euros Exchange Rate Reaches New 12-Week Highs on Thursday
After holding most of its Wednesday gains, the Pounds Euros exchange rate advanced once more on Thursday. Sterling benefitted in the morning from higher global inflationary hopes after OPEC announced plans for oil output caps, but its afternoon performance was much stronger.
Eurogroup President Jeroen Dijsselbloem stated that the European Union may find a way to allow the UK access to the internal market which cheered GBP slightly and this movement only increased after comments in UK Parliament from Brexit Secretary David Davis.
Davis responded to single market concerns by indicating the UK government may be willing to pay a fee to the EU in order to maintain access to the single market. Increased hopes of a softer Brexit with single market access left GBP bullish.
Demand for the Euro remained weak on this week’s usual downside factors as Sunday’s Eurozone political events drew closer.
This also meant the Euro failed to benefit from Thursday’s solid Eurozone stats, which included news that the Eurozone’s October unemployment rate had surprisingly hit 9.8% – its best rate since 2009.
(Previously updated 16:14 GMT 30/11/2016)
Pounds Euros Exchange Rate Tests Weekly Highs Once More on Wednesday Afternoon
While the Pounds Euros exchange rate failed to hold its Tuesday gains by Wednesday morning, the pair had another go throughout Wednesday trade, this time spiking quite widely.
Sterling trade initially appeared to cool with GBP EUR trending quite flatly on the day’s opening levels. However, by the end of the day GBP EUR had hit both a new weekly low and a new weekly high.
Demand for the Euro was weighed down by next week’s Eurozone events, including Italian and Austrian votes on Sunday the 4th and the European Central Bank’s (ECB) meeting on the 8th.
However, the day’s solid Eurozone ecostats also gave the Euro some key support. The Eurozone’s November Consumer Price Index (CPI) estimate came in at 0.6% as predicted.
(Published 07:00 GMT 30/11/2016)
The Pounds Euros exchange rate surged towards the end of Tuesday’s European session as strong UK consumer credit and further political uncertainty in the Eurozone gave Sterling room to recover from its Monday falls.
GBP EUR plummeted from its opening levels of 1.17 to lows of 1.16 on Monday as investors sold the pair from its highs. GBP EUR recovered some of its losses on Tuesday and held above the key level of 1.17 once again, briefly tapping above the psychological resistance point of 1.18.
Pound (GBP) Bolstered by UK Consumer Credit, Weak Euro (EUR)
The Pound plummeted against the Euro on Monday despite the day’s lack of influential datasets from either the UK or the Eurozone, as investors sold the British currency from its recent highs in a bout of profit taking.
This movement was exacerbated by the weekend’s Brexit developments, which heaped a new load of uncertainty onto the already highly uncertain Brexit process set to begin next year.
Lawyers from a pro-EU think-tank intend to argue that withdrawing from the EU with Article 50 does not facilitate withdrawing from the single market, which falls under Article 127 of the European Economic Area (EEA).
This is despite comments from EU leaders that leaving the EU without leaving the single market would not be possible. This increased uncertainty worsened Sterling volatility and exchange rates considerably on Monday.
However, on Tuesday the Pound was resurgent, clawing back most of its Monday losses and at its best points rallying over a cent against the Euro.
This was due to various factors including Euro weakness and buying the Pound from its lows, as well as a surprisingly strong UK consumer credit result from October. Consumer credit was expected to improve to 1.5b, but instead soared to 1.62b. September’s figure was also revised higher, to 1.48b.
Euro (EUR) Falls Limp on Renewed Political Uncertainty Fears
The Euro recovered slightly from lows on Monday as traders bought the shared currency from its lows and were optimistic on the vague tone set by European Central Bank (ECB) President Mario Draghi.
Traders had expected Draghi to take a distinctly dovish stance on monetary policy in his speech to European Parliament on Monday and play up the likelihood of an extension to the ECB’s monetary stimulus measures being put in place in December’s upcoming meeting.
Instead, Draghi reasserted that the future of Eurozone monetary policy would be clarified in December and once again set out arguments that governments in Eurozone nations needed to assist the bank with fiscal stimulus policies.
While this news allowed the Euro to hold its ground on Monday, the shared currency once again fell victim to ongoing political strains on Tuesday as the latest polling figures for the upcoming Italian constitutional referendum came in.
The figures looked bad for Italian Prime Minister Matteo Renzi, who claimed he would resign if citizens vote ‘No’ in the Referendum for constitutional changes. The ‘No’ vote appeared to pull ahead in November, potentially influenced by the surprising Trump win in the US.
The referendum takes place on the 4th of December; the very same day that will see a re-run of Austria’s 2016 presidential election, which has experienced complication after complication this year and could ultimately lead to a win for far-right protectionist Norbert Hofer’s Freedom Party.
Pounds Euros Exchange Rate Forecast: Vital Eurozone Ecostats Publishing Today
After highly volatile movement since markets opened this week, it’s possible the Pounds Euros exchange rate will continue to fluctuate in a wide region and could even lose some of Tuesday’s gains depending on the day’s datasets.
When Wednesday’s European session begins, GBP EUR could react to GfK’s November UK consumer confidence survey. The print is currently projected to worsen slightly from -3 to -4 despite Britain’s solid economic reports in recent weeks.
The Bank of England (BoE) will also publish its latest financial stability report, which could cause significant Sterling movement throughout the day, depending on how it reacts to or reflects last week’s UK Autumn Statement.
If the bank so much as hints that its current easing measures could be wound back in the foreseeable future due to more solid economic growth prospects, Sterling would soar.
The Eurozone will also see a slew of vital ecostats published on Wednesday morning, including Germany’s November unemployment results and the Eurozone’s preliminary November Consumer Price Index (CPI) figures.
German unemployment is predicted to hold at 6.0%, while analysts forecast a 0.6% increase in year-on-year inflation for the Eurozone’s CPI estimate.
Even if these figures impress however, the upcoming Eurozone political events on the 4th of December and the European Central Bank’s (ECB) December 8th meeting will mean Pounds Euros exchange rate losses are likely to be limited.