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Why Has the 2017 Euro Pound Exchange Rate Advanced Since UK Budget 2017?

  • 2017 Euro Pound Exchange Rate Holds above 0.86 – Best levels since mid-January
  • UK Retail Sales Fears Worsen – Weakens Pound despite underwhelming German data
  • EUR Forecast: European Central Bank Decision Thursday – No changes expected
  • GBP Forecast: UK Budget on Wednesday – Britain’s January trade balance on Friday

Demand for the 2017 Euro Pound exchange rate was little changed following Wednesday’s UK Spring Budget 2017.

A lack of surprises in the event despite the Brexit process likely beginning before the end of March left investors uninterested in the Pound.

Alongside an unexciting Budget, Sterling has fallen this week due to retail sales concerns and Brexit jitters.

The Euro, on the other hand, has been able to hold most of its gains against the Pound this week due to some decent data as well as anticipation for Thursday’s European Central Bank (ECB) meeting.

Some analysts have speculated the bank’s tone may begin to edge away from its easing bias sooner rather than later. If this happens during this week’s meeting EUR GBP will advance.

[Previously updated 12:49 GMT 08/03/2017]

The 2017 Euro Pound exchange rate continued to edge higher on Wednesday morning as traders awaited the day’s UK Spring Budget 2017.

UK Chancellor Philip Hammond has put out reminders that this will be the final Spring Budget, with the Budget proper now being held in the autumn instead.

The morning’s German industrial production report beat expectations which helped the Euro to hold this week’s gains.

Industrial production improved from -2.4% to 2.8% month-on-month in January, with the year-on-year score edging from -0.1% to 0.0% rather than falling to the forecast -0.6%.

[Previously updated 16:41 GMT 08/03/2017]

The 2017 Euro Pound exchange rate continued to advance throughout Tuesday’s session as the day’s ecostats were not enough to inspire investors to sell the Euro.

On Tuesday afternoon, analysts became focused on a scandal emerging from the Bank of England (BoE). New BoE Deputy-Governor, Charlotte Hogg, failed to declare that her brother (Quintin Hogg) worked at Barclays Bank. This caused critics to claim that there were potential conflicts of interest.

Labour MP, John Mann, called for Hogg to resign from her post following the news. The Treasury stated that it would reflect on the issue further and return to the matter after the UK Budget on Wednesday.

As a result of the focus on this news, EUR GBP was largely unchanged from the morning.

[Published 11:45 GMT 07/03/2017]

The Euro Pound exchange rate recorded a modest gain on Monday as investors continued reacting to Friday’s news that UK Services slowed as 2017 progressed. Fresh concerns that UK Parliament would not be given a veto on the final Brexit bill also weighed on Sterling.

EUR GBP began the week trending at the level of 0.86 and has advanced slightly since markets opened. The pair was trending near its best levels since mid-January.

Euro (EUR) Held Back by German Factory Slump

The Euro’s gains against the Pound were solid but modest this week as various local factors from the Eurozone weighed on demand for the shared currency.

German factory orders slumped at -7.4% month-on-month in January and fell at -0.8% year-on-year. Some analysts suggested that Germany’s factory sector was seeing more issues than recent buoyant sentiment had indicated.

Tuesday also saw the publication of the Eurozone’s latest Q4 2016 Gross Domestic Product (GDP) estimate – which met expectations at 0.4% quarter-on-quarter and 1.7% year-on-year.

Monday saw confirmation that former French Prime Minister Alain Juppe was not standing for this year’s French Presidential election. Investors had perceived him as having a better chance of beating anti-EU candidate Marine Le Pen in the second round of the election in May.

As a result, concerns rose that Le Pen would see less competition, win the election and remove France from the Eurozone.

However, independent candidate Emmanuel Macron is still seen as a good bet to beat Le Pen in the second round.

Pound (GBP) Slumps on Retail Sales Concerns and Brexit Jitters

The Pound has fallen this week on familiar tunes, as traders once again became worried that the UK could see a ‘hard Brexit’ from the EU with a lack of key input from UK Parliament.

A spokesperson for UK Prime Minister Theresa May indicated on Monday that Parliament would not be given a proper veto on the Brexit deal in fear that it may incentivise the EU to give the UK a bad deal.

UK growth concerns have also hit investors once again since last week’s disappointing UK services PMI was published.

Tuesday saw the publication of a UK retail sales report from the British Retail Consortium (BRC). According to the report, UK retail sales dropped -0.2% year-on-year for the three months into February. Non-food sales were also falling – for the first time in five years.

This suggested to traders that UK inflation was causing consumers to avoid spending. As retail is a considerable part of recent UK growth, 2017 GDP concerns grew on Tuesday.

2017 Euro Pound Exchange Rate Forecast to Advance Further if ECB Impresses

Unless Brexit jitters ease in the coming days or UK data considerably improves, the 2017 Euro Pound exchange rate could end the week higher despite the week’s underwhelming Eurozone data thus far.

Investors will also be keeping a close eye on Wednesday’s UK Budget Statement from Chancellor of the Exchequer Philip Hammond.

If Hammond’s Budget impresses investors, the Pound could recover some of this week’s losses. However, if nothing new or impressive is announced EUR GBP could hold the week’s highs.

It is expected that the Budget will include plans for new UK grammar schools, as well as tax hikes.

Thursday’s session may be more influential for the 2017 Euro Pound exchange rate, but only if the European Central Bank (ECB) deviates from its usual cautiously optimistic tone.

As it stands however, the ECB is likely to take its regular tone regardless as recent Eurozone inflation stats have indicated that consumer prices are only rising in the bloc due to increasing energy prices rather than underlying inflationary pressures in the bloc.

The bank is also likely to cite political instability in the Eurozone and the US as reasons to remain steady on record-low rates.

Fresh UK data may be unable to influence Sterling movement until Friday’s session, which will see the publication of Britain’s January trade deficit results.

EUR GBP Interbank Rate

At the time of writing, the 2017 Euro Pound exchange rate trended in the region of 0.86. The Pound to Euro exchange rate traded at around 1.15.