- 2017 Pound Euro Exchange Rate Trending at 1.15 – Movement limited by sturdy Euro
- Markets React to Trump News – Plus German business confidence increases
- Brexit Begins – Sterling fluctuates widely on Wednesday
- EUR Forecast: German Data Due Later in the Week – Plus Eurozone inflation stats
2017 Pound to Euro Exchange Rate Fluctuates Widely on Brexit Start Day
After its surge in demand right after the activation of Article 50, the 20167 Pound Euro exchange rate slipped from its highs and fluctuated widely around the day’s opening levels.
With the Brexit process now a certainty, political jitters in the Eurozone rose again. Investors speculated that a ‘Frexit’ may still be possible if anti-EU French Presidential candidate Marine Le Pen wins the election in April and May.
Speaking of May, Sterling movement is likely to cool in the coming days as analysts do not expect any further major Brexit developments until negotiations begin in full, which is likely to start in May or June.
Thursday’s session will see the publication of German Consumer Price Index (CPI) figures, which could bolster the Euro’s defenses if they beat expectations.
[Previously updated 12:51 BST 29/03/2017]
Volatility in the 2017 Pound to Euro exchange rate continued on Wednesday, as investors adjusted their positions during the day’s early Brexit proceedings.
GBP EUR slumped on Tuesday night and Wednesday morning as investors reacted to news that UK Prime Minister Theresa May had officially signed the letter that would go on to activate Article 50.
However, at around noon on Wednesday when the letter was delivered to European Council President Donald Tusk, the Pound was recovering from its worst levels against the Euro.
GBP EUR fluctuated widely in the region of 1.15 during the first half of Wednesday’s European session after recovering from its early morning lows of 1.14.
Some investors sold the Pound on Brexit jitters and profit-taking, while others welcomed the certainty that came with activating Article 50 and bought the Pound again.
[Previously updated 16:47 BST 28/03/2017]
2017 Pound Euro Drops on Tuesday Ahead of Wednesday’s Article 50 Activation
Despite firming on Tuesday morning, the 2017 Pound Euro exchange rate slipped in the afternoon to below the week’s opening levels as Brexit jitters increased.
The reality that the UK government will be activating Article 50 and formally beginning the Brexit process on Wednesday hit some traders who sold the Pound.
Some analysts argue the Brexit is not yet fully priced into the British currency and that it still has further to fall. Others suggest Sterling could even advance when Brexit begins as Article 50 uncertainty will be over.
Regardless, GBP is likely to remain volatile throughout Wednesday’s European session too as different investors have different ideas of how to react to the beginning of the lengthy UK-EU divorce process.
[Previously updated 12:54 BST 28/03/2017]
The 2017 Pound Euro exchange rate had edged higher from the week’s opening levels by Tuesday midday, but it was still largely flat on the day’s opening levels and trended in the region of 1.15 despite a brief jump to 1.16.
Investors had reacted with optimism to comments allegedly coming from European diplomats in Britain, stating that the UK government was likely to back down from its threat that Britain would sooner take no deal than a bad deal on Brexit.
This bolstered hopes among traders that UK and the EU would focus on getting the most beneficial post-Brexit deal possible.
[Published 06:00 BST 28/03/2017]
Monday saw the 2017 Pound to Euro exchange rate fluctuate near the week’s opening levels as both the Pound and Euro saw an increase in demand from investors. The biggest movement of the day was a market rush into ‘safe’ investments as the ‘Trump rally’ seen since November 2016 unravelled.
GBP EUR saw a modest gain last week, beginning and ending the week in the region of 1.15 and failing to hold highs of 1.16. Monday saw the pair advance slightly but it was once again unable to hold its best levels.
Pound (GBP) Benefits from Demand for ‘Safe Haven’ Government Bonds
Despite expectations that the UK government would be activating Article 50 and formally beginning the Brexit process on Wednesday this week, the Pound benefitted from an increase in market demand for ‘safe havens’ on Monday.
UK government bonds are seen as a notably secure asset and are priced in GBP. As a result, investors flocked out of UK stocks into the Pound and government bonds throughout the day’s trade session.
This sudden increase in demand for ‘safe havens’ is the market reaction to US President Donald Trump’s failure to pass his proposed ‘American Healthcare Act’ (AHCA) through Congress.
Analysts have argued that as Trump failed to find even enough Republican support for his healthcare plan, he was also unlikely to find enough support for his proposed fiscal policy plans either.
Anticipation for Trump’s fiscal policy plans has been among the main reasons for the recent increases in US confidence and stock rallies in what analysts called the ‘Trump rally’.
As doubts rise that the fiscal policies will succeed in Congress, the rally has begun to collapse and markets have looked to safer investments amid rising uncertainty in the world’s biggest economy.
Kit Juckes from Societe Generale commented on Monday’s market movement;
‘Failure to pass the Healthcare Bill doesn’t mean that President Trump’s entire agenda is in tatters but it’s a huge setback all the same and the market mood reflects as much. Bond yields, the dollar, commodity prices and equities are all weaker.’
Euro (EUR) Sturdy on French Election Polls and ECB Comments
The 2017 Pound to Euro exchange rate saw modest gains on Monday but it was unable to hold its best daily levels due to solid demand for the Euro, which limited Sterling strength throughout the day.
Last week’s reasons for Euro optimism remained supportive. Key Eurozone data has beaten expectation in recent weeks and political jitters in the currency bloc are fading.
Concerns of a potential 2017 French election win for anti-EI Marine Le Pen faded further over the weekend as the latest opinion polls indicated that pro-EU centrist Emmanuel Macron could win both the first and second rounds of the election. This has strengthened Euro support this week.
Le Pen has stated she intends to withdraw France from the Eurozone if she becomes President. The Euro bloc losing one of its biggest economies has been perceived as among the biggest threats to the single currency’s future.
Demand for the Euro has also improved this week thanks to comments made by a European Central Bank (ECB) official on Monday.
ECB board member Sabine Lautenschläger indicated during a banking supervision press conference that markets should begin preparing for ‘a change’ in ECB policy.
This led to an increase in market speculation that the ECB could rein in its quantitative easing (QE) measures further or even hike Eurozone interest rates in the coming year.
2017 Pound to Euro Forecast: Brexit Start Could Cause Sterling Jitters
While investors indulged in the Pound for access to UK government bonds on Monday and many analysts predict the Brexit process has been largely priced into the British currency, it still has potential to see volatility in the coming days.
The UK government intends to activate Article 50 and formally begin the Brexit process on Wednesday the 29th of March.
Amid a lack of Eurozone ecostats due on Tuesday or Wednesday, GBP EUR could be volatile as traders continue to price in the Brexit. Markets could also sell GBP from its Monday highs if they leave UK government bonds in favour of other ‘safe haven’ assets.
However, Sterling could be supported if Wednesday data beats expectations. Wednesday will see the publication of Britain’s February consumer credit and mortgage approval reports.
Influential Eurozone data won’t be published until later in the week, but Thursday’s German Consumer Price Index (CPI) and Friday’s Eurozone CPI are likely to be highly influential to the 2017 Pound Euro exchange rate.