Homepage » Brexit » Brexit Week One – 2017 Pound Euro Exchange Rate Rises as Article 50 Uncertainty Fades

Brexit Week One – 2017 Pound Euro Exchange Rate Rises as Article 50 Uncertainty Fades

  • 2017 Pound Euro Exchange Rate near 1.16 – Tests March highs on Thursday
  • Investors Hope UK will avoid ‘No Deal’ Brexit – Brexit uncertainty could ease
  • Week One of Brexit Process – Negotiations to take at least two years
  • Forecast: UK Growth Stats on Friday – Plus yearly Eurozone inflation from March

Thursday Sees Gains in 2017 Pound Euro Exchange Rate

The 2017 Pound Euro exchange rate easily locked in gains on Thursday afternoon, following the publication of Germany’s highly disappointing preliminary March Consumer Price Index (CPI) report.

While analysts predicted inflation would drop in Germany as Easter takes place in April this year after a March Easter in 2016, this drop off was still worse than many expected.

The month-on-month inflation figure worsened from 0.6% to 0.2% despite being projected to only slip to 0.4%, while the yearly result dropped from 2.2% to 1.6% and missed the forecast result of 1.9%.

This, as well as the day’s disappointing Eurozone confidence results, left GBP EUR at its best levels since the first week of March.

[Previously updated 12:36 BST 30/03/2017]

After fluctuating near the week’s opening levels for most of Wednesday trade, the 2017 Pound Euro exchange rate strengthened on Thursday as market jitters cooled.

Investors saw the smooth activation of Article 50 and the generally friendly reaction from EU leaders throughout Wednesday as an indication that Brexit negotiations would go well when they begin a few months from now.

Demand for the Euro also weakened on Thursday, allowing GBP EUR to touch levels of 1.16 around midday.

The day’s Eurozone confidence stats had come in below expectations. Business confidence was expected to improve to 0.9 in March but instead remained at 0.82. Economic sentiment and services sentiment also came in below expectations.

[Previously updated 16:47 BST 29/03/2017]

2017 Pound Euro Exchange Rate Volatile on First Day of Brexit Process

Despite high volatility in 2017 Pound Euro exchange rate trade throughout Wednesday, the Pound was able to hold above its worst levels against the Euro.

This was partially due to the activation of Article 50 lightening some of the uncertainty on Britain’s outlook, but the Euro also weakened on Wednesday.

Political jitters held the Euro back from its best levels, as the start of the Brexit process revived concerns of a possible ‘Frexit’.

However, the Euro could take point in GBP EUR movement on Thursday depending on the results of Germany’s preliminary March Consumer Price Index (CPI) results.

If German inflation beats expectations, European Central Bank (ECB) tightening speculation will flare up again and the Euro will strengthen.

[Previously updated 13:00 BST 29/03/2017]

Movement in the 2017 Pound Euro exchange rate was highly volatile on Wednesday.

The UK government officially signed the letter to activate Article 50 which was received by European Council leader Donald Tusk around midday. This led to the activation of Article 50 and the official start of the formal Brexit process.

Market movement was mixed and saw the Pound fluctuating widely throughout the day. Sterling plummeted on Tuesday night and Wednesday morning when it was confirmed that UK Prime Minister Theresa May had signed the Article 50 letter, but the pair surged again in the half hour following Article 50’s activation.

Some investors sold the Pound on Brexit jitters and profit-taking, while others returned to it due to fading uncertainty and the expectation that Brexit negotiations were unlikely to start for another few months.

[Published 06:00 BST 29/03/2017]

The 2017 Pound Euro exchange rate saw another day of volatility on Tuesday, as both currencies remained firm and lacked a notable directional bias. Uncertainty could weaken Sterling today however as the UK government is expected to finally begin the Brexit process.

GBP EUR has trended in the region of 1.15 throughout the week so far. While it briefly touched a high of 1.16 on Tuesday, it was unable to hold this level due to Euro strength.

Pound (GBP) Firms as Traders Await Article 50 Activation

After Monday’s session saw markets focusing on the US and demand for ‘safe haven’ correlated assets, Tuesday trade was comparatively quiet, with Sterling putting in mixed movement.

Some investors sold the Pound from its Monday highs as the Brexit start date approached, while others firmed on the British currency due to reports that the UK government was backing away from the ‘no deal’ Brexit threats it made earlier in the year.

During a Brexit speech back in January, UK Prime Minister Theresa May stated that ‘no deal’ with the EU for post-Brexit Britain would be ‘better than a bad deal’.

Some took this as a threat from May to the EU that the UK could become an offshore tax haven to remain competitive if the EU did not give the nation a good deal.

However, according to a report in The Guardian, European diplomats believe the government now regrets this stance. Allegedly, a UK-based ambassador stated;

‘They [British ministers] have realised that ‘no deal is better than a bad deal’ won’t fly. They are worried about people in this country who have an ideological and political intention of creating chaos. The civil service have told them it would create havoc.’

This report bolstered hopes among traders that the UK government would cooperate with the EU in order to get as good a post-Brexit deal as possible during negotiations.

Euro (EUR) Remains Solid on Political and Economic Outlook

The past few weeks have seen the Eurozone’s political and economic outlook improve notably, and uncertainty in the bloc has faded slightly after being high for much of the year so far.

Recent 2017 French election polls show increasing support for pro-EU centrist candidate Emmanuel Macron, who investors hope will beat anti-EU Marine Le Pen and keep France in the Eurozone.

While many polls show that Le Pen could still beat Macron in the first round of the election in April, the second round (in May) looks like a decisive win for Macron. Jitters remain high on the possibility of a Le Pen upset, but investors are more optimistic this week.

The shared currency has also found support in this week’s Eurozone data. While not highly influential, Monday’s German business confidence results from Ifo beat expectations for March. The business climate result improved from 111.1 to 112.3 and expectations rose from 104.2 to 105.7.

2017 Pound Euro Forecast: Sterling Could be Jittery during First Day of Brexit Process

The day is upon us, the day on which the UK government plans to activate Article 50 and formally begin the Brexit process. This will start a period of negotiations between Britain and the EU lasting two years or more that will end with Britain’s divorce from the union.

Analysts have been split on whether or not the Pound will see another round of Brexit jitters once the process actually begins. Some believe it will drop as investors continue to price in Brexit, but others believe the Pound has already done its Brexit falling.

Some even speculate the 2017 Pound Euro exchange rate could benefit from the Brexit process, as some uncertainty could ease when negotiations finally begin.

Analysts have noted that traders have put in a considerable amount of speculative short positions on Sterling thus far this week.

Relatively influential UK data will also be published on Wednesday, which could help the Pound hold its ground slightly even if markets indulge in a Brexit selloff.

February consumer credit stats and mortgage approvals data could influence Sterling slightly if they impress, but otherwise investors may wait for data due later in the week before they move on the Pound. Friday will see the publication of Britain’s final Q4 Gross Domestic Product (GDP) results.

Late-week will also see a number of highly influential Eurozone datasets published, including German Consumer Price Index (CPI) figures and Eurozone business confidence on Thursday, followed by German unemployment stats and Eurozone CPI on Friday.