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2017 GBP EUR Exchange Rate Plummets on Surprisingly Hawkish Tone from ECB

  • 2017 GBP EUR Exchange Rate Dips to 1.13 – First time this low since mid-January
  • European Central Bank President is Optimistic – Draghi notes risks have largely disappeared
  • UK Trade Deficit Lightens – But other mixed stats leave Pound limp
  • Forecast: Bank of England Meets Next Week – Eurozone inflation stats also due

2017 GBP EUR Exchange Rate Dips to 1.13 Low on Friday

The 2017 GBP EUR exchange rate continued to fall on Friday afternoon as the Euro ended the week building momentum from Thursday’s comments from ECB President Mario Draghi.

This saw the Pound to Euro exchange rate spending most of the day trending in the region of 1.14, though it briefly fell as low as 1.13 towards the end of the week’s European session. GBP EUR is now within a cent of the 2017 low seen in January.

Unless there are notable developments in the Brexit or in Eurozone election news over the weekend, the Pound to Euro exchange rate may not see a significant shift in direction on Monday.

That said, investors may buy the Pound up from its cheapest levels in anticipation for the Bank of England’s (BoE) policy decision later in the week.

[Previously updated 12:52 GMT 10/03/2017]

Friday morning’s ecostats ultimately failed to affect the trajectory of the 2017 GBP EUR exchange rate, which continued to slump deeper into its 7-week-lows of 1.14.

Optimism about Thursday’s surprisingly hawkish tone from European Central Bank (ECB) President Mario Draghi left the Euro one of the day’s stronger currencies and it easily pushed down the weak Pound.

The day’s UK data included solid UK trade deficit and construction output results from January. However, due to unexpectedly poor January manufacturing production and industrial production stats the Pound was unable to capitalise.

With the week’s key UK and EU events all accounted for, the 2017 GBP EUR exchange rate is unlikely to see another major shift in movement for the rest of Friday unless US Dollar strength weakens the Euro.

[Published 07:00 GMT 10/03/2017]

The 2017 GBP EUR exchange rate continued to tumble down to new weekly lows on Thursday morning before the European Central Bank’s (ECB) meeting. Surprisingly hawkish statements from ECB President Draghi saw the Euro extend its strength on Thursday afternoon.

The Pound to Euro exchange rate began the week trending at the level of 1.15 and on Thursday afternoon briefly slipped down to the level of 1.14 for the first time since mid-January.

Pound (GBP) Fails to Find Notable Support

As the Pound to Euro exchange rate tested its lowest levels in seven weeks and neared lows of 1.14, the only thing that appeared to be supporting GBP EUR on Thursday was psychological resistance at 1.15.

While Sterling briefly saw some relief on Wednesday following the UK Spring Budget, the 2017 GBP EUR exchange rate was quickly back to its weekly lows by Thursday morning.

This means investors had largely brushed over the latest UK growth forecast from the Office for Budget Responsibility (OBR). The OBR had increased its Gross Domestic Product (GDP) projection for the nation from 1.4% to 2% following UK Chancellor Philip Hammond’s Budget.

Traders may have ignored the optimistic growth outlook due to concerns that as consumer prices spike amid low wage growth, consumer spending will fall and Britain’s key services sector will see a significant slowing of activity throughout the year.

A lack of clarity on Brexit plans or any long-term outlook from the Treasury also left investors apathetic on the Pound after the Budget.

This week’s UK economic calendar has been relatively quiet. Investors have been largely focused on concerns that the Brexit process proper will be beginning by the end of the month, leaving Sterling jittery all week.

Euro (EUR) Bolstered by Surprisingly Hawkish Draghi

The Euro jumped in demand on Thursday after European Central Bank (ECB) President Mario Draghi took a surprisingly hawkish tone in the day’s ECB press conference.

As investors expected, the ECB decided to leave Eurozone monetary policy frozen in its March meeting. While the ECB decision itself had little impact on Euro movement, comments from Draghi in the following press conference were a different story.

Draghi announced that the ECB’s 2017 Eurozone growth forecasts and inflation forecasts were up. Eurozone Gross Domestic Product (GDP) is predicted to come in at 1.8% and was previously projected to be 1.7%. The Consumer Price Index (CPI) forecast was risen from 1.3% to a much higher 1.7%.

Not only that, but the typically dovish Draghi indicated that the previous ‘sense of urgency’ had dissipated. This was reflected as the bank’s usual line that it would use ‘all the instruments at its disposal’ to protect the Eurozone economy had gone from the ECB’s statement.

Draghi also skipped a question asking if Eurozone interest rates could rise before the bank’s quantitative easing (QE) program ends. Some analysts found this curious as Draghi usually insists that interest rates would remain low until after QE is over.

2017 GBP EUR Exchange Rate Forecast: January Trade Data as Friday Focus

Following Thursday’s surprisingly hawkish comments from European Central Bank (ECB) President Mario Draghi, the 2017 GBP EUR exchange rate is likely to end the week well below opening levels – unless Friday’s UK data is highly impressive.

Britain’s January trade deficit update will be published on Friday morning. After UK Chancellor Philip Hammond indicated this week that the UK government will still focus on lightening the trade deficit, investors will be hoping for a lighter-than-expected deficit report.

The figure is predicted to improve slightly from -£3.3b to -£3.1b. Any better improvement than this could offer Sterling some late-week support but this is unlikely to offer the Pound significant support.

Friday will also see the publication of other sets of January UK data, including construction output, manufacturing production and industrial production.

The most influential Eurozone data of the day will be Germany’s January trade balance, which is expected to see the surplus slip slightly from 18.7b to 18b.

Traders will be looking ahead to next week for the next big Pound movements. Speculation suggests the UK government is hoping to begin the Brexit process on the 15th of March. If this does indeed happen, the Pound could plunge next week once Article 50 is activated.

Next Thursday will see the Bank of England (BoE) hold its March policy decision meeting as well as the Eurozone’s February inflation stats, making next Thursday a key date for potential 2017 GBP EUR exchange rate movement too.