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British Pound Euro Exchange Rate Gains on Thursday as Volatility Cools

  • British Pound Euro Exchange Rate Near 1.16 – Pairing recovers losses
  • UK Inflation Higher than Expected – But Euro strong on French election hopes
  • February Retail Sales Impress – GBP EUR rises despite analyst caution
  • EUR Forecast: First March PMIs Due Friday – Euro could remain sturdy until then

British Pound Euro Reaches 1.16 on Thursday

Despite fluctuations and volatility earlier in the week as the Pound and Euro clashed on strengths, the British Pound Euro exchange rate put in solid gains during Thursday’s European session.

This was largely because of Britain’s February retail sales results, as well as a lack of fresh supportive data from the Eurozone.

However, the Euro could increase in strength again on Friday if the day’s preliminary March Eurozone PMIs from Markit impress traders.

With Eurozone political jitters now lighter, the Euro may see solid gains if the Eurozone economy looks to outperform expectations in March.

[Previously updated 12:58 GMT 23/03/2017]

Thursday’s European session saw the publication of Britain’s February retail sales results. The figures were expected to see minor improvements from poor results in January, but came in well above expectations.

Retail sales improved from -0.5% to 1.4% month-on-month, and climbed from 1% to 3.7% year-on-year.

GBP EUR briefly surged to a multi-week-high of 1.16 in reaction to the report, but it slipped from its best levels in the early afternoon after analysts advised caution.

Some analysts claimed retail sales could slow again in the coming months. Others pointed out that despite the strong February figures, the three months into February saw the biggest three-month-drop in retail activity since 2010.

[Previously updated 16:41 GMT  22/03/2017]

British Pound Euro Sees Another Day of Volatility

While the British Pound Euro looked to end Wednesday’s European session near the day’s opening levels, the pair has shot up and plunged throughout the day due to mixed demand for the Pound.

Investors cooled on the Pound’s inflation rally that started on Tuesday and some sold GBP EUR from its highs, causing the pair to briefly fall as low as 1.14 on Wednesday afternoon.

However, by the end of the day BoE optimism as well as hopes for Thursday’s upcoming UK retail sales results kept the Pound appealing.

The Pound outlook could change considerably depending on Thursday’s retail sales results.

If they beat expectations, GBP EUR could extend its weekly gains as concerns of worsening retail activity due to inflation fade. This would increase hopes that Britain could still see strong UK growth in 2017.

However, worse-than-expected retail sales will increase speculation that UK growth could be harmed by slowing services sector activity, and Sterling could shed some of its recent gains.

[Previously updated 12:51 GMT 22/03/2017]

The British Pound Euro exchange rate trended largely flatly on Wednesday morning amid a lack of fresh ecostats to influence the Pound or the Euro. As a result, GBP EUR trended comfortably above the level of 1.15.

Wednesday saw the publication of the Eurozone’s January current account results. This low influence figure dropped from €46.9b to €2.5b.

Sterling held its ground throughout the day due to lasting optimism over Tuesday’s UK inflation stats, as well as a slightly weaker Euro as investors cooled on the relief rally seen earlier in the week.

[Published 06:00 GMT 22/03/2017]

The British Pound Euro exchange rate recovered losses on Tuesday. However, while the Pound surged against other major currencies due to UK inflation, its gains against the Euro were modest at best. This was due to French election hopes bolstering demand for the shared currency.

GBP EUR began this week trending at the level of 1.15. The pair slipped to 1.14 at various points on Monday and Tuesday morning but following Tuesday’s data was able to comfortably trend near the week’s opening levels again.

Pound’s (GBP) Inflation Gains Limited by Dovish Carney

Demand for the Pound shot up on Tuesday, influenced mainly by the day’s UK Consumer Price Index (CPI) report from February.

According to the report, British inflation shot up from -0.5% to 0.7% month-on-month in February, while the yearly figure rose from 1.8% to 2.3%. This put inflation well above the projected results of 0.5% and 2.1% respectively.

Notably, the yearly inflation rate was the best since September 2013 and above the Bank of England’s (BoE) target inflation rate of 2%.

Investors were initially excited that this stronger-than-expected inflation stat would be enough to put additional pressure on the BoE about tightening UK monetary policy.

However, at an unrelated Q&A session on banking standards, BoE Governor Mark Carney was asked about the day’s inflation stats and offered a bluntly dovish response;

‘Look, (it’s) a single data point. You never overreact to a single data point’

This indicated to markets that the one better-than-expected inflation stat by itself was not enough to impress the cautious Carney, especially with the highly uncertain Brexit negotiations just around the corner.

Euro (EUR) Holds Ground as Investors React to French Presidential TV Debate

Monday night saw the first televised debate of French Presidential candidates, ahead of the 2017 French election in April and May.

Of all the candidates, centrist frontrunner Emmanuel Macron was perceived as the most convincing in the hours-long debate, according to snap polls following the broadcast.

In recent months Macron has been seen as the favourite to beat anti-EU candidate Marine Le Pen in the election – if not in the first round then in the second round.

Macron and Le Pen have been neck-and-neck in recent first-round polls. The first round sees many different candidates facing off, and the top two will go head-to-head in a second round in May.

Currently, Macron and Le Pen are seen as most likely to go through to the second round. According to polls, supporters of other centrist and left-leaning candidates will help give to Macron a clear lead in the second round.

The increased confidence in Macron has lent the Euro support. The shared currency has been jittery in recent weeks due to concerns that Le Pen would deliver her campaign promise to withdraw France from the Eurozone if she wins the election.

British Pound Euro Exchange Rate Forecast: Cooler Trade on Wednesday

After volatility in the British Pound Euro exchange rate on Monday and Tuesday, investors are likely to cool on the pair on Wednesday amid a lack of influential ecostats.

While Eurozone current account data for January will be published on Wednesday morning, these figures are unlikely to be particularly influential.

Instead, traders are likely to continue reacting to Bank of England (BoE) tightening speculation, as well as speculation about the French Presidential election.

Despite the strong performance of centrist frontrunner Emmanuel Macron in Monday’s TV debate, the surprise wins of Brexit and Trump in 2016 have left Euro investors anxious.

Wednesday will also be a week from the day the UK government plans to activate Article 50 – which will begin the irreversible Brexit process that ends in Britain withdrawing from the EU and most of its economic benefits over the next 2-3 years. This may also leave GBP investors on edge.

Data due for publication later in the week will be highly influential for GBP EUR too. Britain’s February retail sales figures will be released on Thursday and could indicate how UK consumer habits have been changed by spikes in consumer prices.

Then on Friday, the Eurozone’s preliminary March PMIs from Markit will indicate how the currency bloc’s economy is faring, which could push the British Pound Euro exchange rate down towards the end of the week if stats impress.