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Thursday’s Draghi Comments Push the British Pound Euro Exchange Rate Higher

  • British Pound Euro Exchange Rate Holds at 1.15 – Recovers from dip to 1.14
  • Sterling Sold from Highs on Wednesday – But remains well above week’s opening levels
  • ECB Disappoints – Draghi takes dovish tone on Thursday
  • GBP Forecast: UK Growth Results Due Next Week – Could give Sterling a boost

British Pound Euro Exchange Rate Tightens on Friday Afternoon

While the British Pound Euro exchange rate slipped on Friday morning, the pair’s movement tightened in the afternoon as Sterling recovered slightly from its losses. GBP EUR was overall little changed throughout the day however.

Markets around the globe were jittery ahead of the inauguration of Donald Trump as the 45th Presidejnt of the USA. Trump will be sworn in at 17:00 GMT.

Sharp currency movements are unlikely before Trump takes his first actions in office, but some markets are hoping for Trump’s inauguration speech to include details about what he hopes to accomplish for the US economy which may weaken the Euro.

[Previously updated 13:00 GMT 20/01/2017]

Demand for the British Pound Euro exchange rate slipped on Friday morning as the latest UK retail sales figures disappointed investors.

After a highly impressive November in UK retail, markets expected December to follow up with a year-on-year result of 7.2%.

However, monthly retail sales plunged -1.9% as higher consumer prices hit citizens in the pocket. The year-on-year figure fell from 5.7% to 4.3% despite being expected to improve.

[Previously updated 16:44 GMT 19/01/2017]

British Pound Euro Exchange Rate Advances after Draghi’s Press Conference

Thursday afternoon saw European Central Bank (ECB) President Mario Draghi hold his first press conference of 2017.

Despite recent Eurozone ecostats impressing, Draghi took a neutral to dovish tone towards the bloc’s economic outlook that disappointed Euro investors and left the shared currency weaker.

While the Euro’s losses were light, the British Pound Euro exchange rate briefly reached above 1.16 for the first time since the beginning of the year.

The main takeaway from Draghi’s conference was the usual outlook. The Eurozone’s inflationary pressure remained subdued, and economic outlook risks remained on the downside.

[Previously updated 12:48 GMT 19/01/2017]

The British Pound Euro exchange rate edged higher on Thursday morning ahead of the European Central Bank’s (ECB) first monetary policy decision of the year.

The ECB left Eurozone policy frozen in its meeting, as expected. However, the main event of the day will be a press conference from ECB President Mario Draghi in the afternoon.

Sterling, on the other hand, saw generally solid trade for most of Thursday. Investors have remained optimistic in the British currency since UK Prime Minister May’s Brexit speech earlier in the week.

A very pro-globalisation speech from May at the World Economic Forum on Thursday morning may also have given the Pound a little support.

[Previously updated 10:48 GMT 19/01/2017]

Tuesday’s Brexit speech was viewed positively by investors and GBP rallied as a result, but the British Pound Euro exchange rate was sold from its highs on Wednesday as investors took profit and concerns relating to a second Scottish referendum took hold. The Euro was steady as markets awaited Thursday’s European Central Bank (ECB) meeting.

The Pound also came under pressure following some choice comments from Foreign Secretary Boris Johnson.

The UK official said of the French President; ‘If Monsieur Hollande wants to administer punishment beatings to anybody who chooses to escape, rather in the manner of some World War 2 movie, then I don’t think that that is the way forward and I don’t think it’s in the interests of our friends and partners.’

There was an immediate backlash to Johnson’s comments, prompting Number 10. to come out in support of the often controversial secretary and claim that he was merely making a ‘theatrical comparison’.

A spokesperson for the PM stated; ‘He was making a point, he was in no way suggesting that anyone was a Nazi. There is not a government policy of not mentioning the war.’

GBP EUR trended above the level of 1.15 for most of Wednesday’s European session despite briefly dipping to 1.14. By Thursday the pairing was back in the mid 1.1550 range despite the RICS House Price Balance for December falling from 29% to 24%. With other UK data lacking today, Eurozone developments will be the main cause of GBP EUR volatility.

Pound (GBP) Sold from Tuesday Highs Despite Optimism About Supreme Court Judgement

The Pound put in one of its best performances in months on Tuesday as the British currency soared across the board in response to UK Prime Minister Theresa May’s highly anticipated Brexit speech.

As May took on a confident tone towards post-Brexit UK and the government’s determination to get a good UK-EU trade deal even outside the single market, trader confidence also improved. As a result, the long-term GBP outlook increased and Sterling surged.

While the British currency was sold from its highs during Wednesday’s European session in a bout of profit-taking, its losses were extended due to some mixed UK employment results.

December’s UK jobless claims saw a surprising drop -10k despite markets expecting jobless claims to worsen by 5k.

On the other hand, the number of new UK jobs created in November came in at -9k despite being predicted to only fall by -6k.

However, the Pound’s losses were softened later in the day by the news that UK Supreme Court had finally announced the date its ruling on the UK government challenge would be made.

The result of the Brexit legal battle between High Court and the UK government will be announced on the 24th of January. Analysts predict the High Court’s decision will be upheld, meaning Article 50 will need to be activated through Parliament rather than by just the UK government.

Euro (EUR) Sturdy Ahead of European Central Bank (ECB) Meeting

Demand for the Euro has been decent this week. The shared currency has benefitted considerably from the US Dollar’s selloff earlier in the week, as well as confidence from EU leaders speaking at the World Economic Forum.

This week’s Eurozone ecostats have also helped the Euro to trend sturdily, such as Monday’s impressive November trade surplus and Tuesday’s decent economic sentiment surveys from ZEW.

More vitally, Wednesday’s European session saw the publication of the Eurozone’s December Consumer Price Index (CPI) results. Germany’s inflation figures came in at 1.7% year-on-year as projected, as did the Eurozone bloc’s inflation rate of 1.1%.

These figures have all helped the single currency to remain buoyant this week, though the Euro has been highly influenced by the strong movements of the Pound.

2017 British Pound Euro Rate Forecast to Fall if Draghi Takes Hawkish Stance

Concern about the Eurozone’s economic recovery remain a significant downside factor to Euro trade, but if the European Central Bank (ECB) continues to edge towards a more neutral or even hawkish tone when it comes to the future of monetary policy Euro trade is likely to strengthen in the long-term.

The main event during Thursday’s European session will be the European Central Bank’s (ECB) first policy meeting of 2017.

No change in monetary policy is expected from the bank, but markets will be closely eyeing the words of ECB President Mario Draghi in the press conference following the meeting.

If Draghi brings up the heightened global inflation outlook, spurred on by the possibility of fiscal stimulus from the US Donald Trump administration and higher Federal Reserve interest rates, the fears of Eurozone inflation may subside and the Euro could strengthen.

Friday’s session could also influence GBP EUR movement. Germany’s December producer price results, will be published, as well as the ECB’s survey of professional forecasters.

Over in the UK, Friday will see the publication of December’s retail sales results.

However, the main event on Friday will be the inauguration of Donald Trump as the 45th President of the USA.

While this will not take place until near the end of the week’s European session, any actions Trump takes in his first few days in power have the high potential to directly influence the US Dollar (USD) which in turn could affect the 2017 British Pound Euro  exchange rate.