- EUR GBP 2016 Exchange Rate Touches 0.85 – On track to register gains this week
- UK Borrowing Figures Dent GBP Demand – Limp Sterling movement continues on Wednesday
- ECB’s Final 2016 Bulletin Hopeful – ECB perceives Eurozone inflation above 1%
- Forecast: Quiet Trade Expected Next Week – UK markets closed Monday and Tuesday
EUR GBP 2016 Exchange Rate Gains over a Penny This Week
The EUR GBP 2016 exchange rate continued to advance on Friday, as the day’s UK growth data was not enough to inspire strength in the Pound.
Britain’s final Q3 Gross Domestic Product (GDP) results improved to 0.6% quarter-on-quarter, but slipped to a worse than expected 2.2% year-on-year which weighed on optimism slightly.
As the US Dollar’s movement was also mixed on Friday, the Euro benefitted and was able to easily take EUR GBP higher. As a result, the pair looked to end the week’s European session above 0.85.
UK markets will be closed on Monday and Tuesday to observe bank holidays, while Eurozone markets will be closed on Monday.
(Previously updated 22/12/2016)
EUR GBP 2016 Exchange Rate Hits Key 0.85 Level
Thanks to various factors including a relatively hawkish economic bulletin from the European Central Bank (ECB) and broad weakness in the US Dollar, the Euro performed well on Thursday.
Sterling, on the other hand, was held back throughout the day by the latest Brexit jitters. Reports indicated that a post-Brexit UK-EU trade deal could be vetoed by just one EU member state, which left investors even more concerned about Britain’s ability to remain in the EU single market.
As a result, the EUR GBP 2016 exchange rate briefly advanced above the key level of 0.85 on Thursday afternoon. This was the first time the exchange rate had broken this level since early-December.
EUR GBP could continue to advance on Friday if the day’s UK ecostats fail to inspire Pound investors.
(Previously updated 12:35 GMT 22/12/2016)
The European Central Bank’s (ECB) final 2016 economic bulletin left some investors impressed on Thursday which slightly bolstered the strength of the EUR GBP 2016 exchange rate earlier in the day.
In its bulletin, ECB officials forecast that Eurozone inflation will rise above 1% in the new year for the first time since 2013. The ECB also sees the global growth outlook improving steadily.
This, as well as a weak US Dollar and hopes that Greek debt relief talks will find a quick solution soon kept the Euro strong on Thursday morning, allowing it to register some gains against the Pound.
(Published 07:00 GMT 22/12/2016)
The EUR GBP 2016 exchange rate edged higher on Wednesday, largely due to an underwhelming UK public sector net borrowing report. Weakness in the US Dollar also benefitted EUR GBP as it allowed the Euro some relief.
EUR GBP spent most of Wednesday’s European session trending above the level of 0.84 after spending most of the week in the region of 0.83, making it the best steady EUR GBP exchange rate since early-December.
Euro (EUR) Benefits from Weakness in the US Dollar (USD)
The Euro has performed poorly since last week’s Federal Reserve meeting due to its negative correlation with the US Dollar. USD surged last week and early this week on hopes that the Fed would hike US interest rates three times in 2017.
As the US Dollar was sold from its best levels on Wednesday, the Euro was afforded some room to breathe, trending more sturdily against other majors such as the Pound.
Wednesday’s Eurozone consumer confidence results also bolstered Euro demand slightly, as the figure lightened from -6.2 to a better than expected -5.1.
This has resulted in the Euro performing much better this week than last, despite ongoing uncertainty in the Eurozone bloc and delays in Greece’s debt relief talks.
According to The Guardian’s Greece correspondent, Helena Smith;
‘Monday’s Euro group meeting was a test case in humiliation for the embattled Greek government with Athens being forced to accept in writing that the bonus proclaimed by prime minister Alexis Tsipras for pensioners is a “one off” that will never be repeated.
Finance ministry sources say with the handwringing still ongoing, Athens has yet to send the letter. Without it, Euro zone partners have said the retaliatory decision to freeze short-term debt relief measures – a huge setback for Athens – cannot be lifted.’
Pound (GBP) Trade Weakens as Public Borrowing Prints Worse than Expected
GBP investors have had modest reminders that the Brexit is imminent this week, in the form of comments from UK Prime Minister Theresa May’s refusal to commit to an MP vote on Brexit plans as well as the week’s latest UK public sector net borrowing stats.
Wednesday morning saw the publication of November’s borrowing figures, which were predicted to worsen from October’s disappointing 4.3b result to 11.6b.
However, when the result came in at a worse than forecast 12.2b, the Pound’s bearishness worsened.
Some investors see a poor year ahead for the UK economy and the Office for Budget Responsibility (OBR) predicts that borrowing will continue to rise until the end of the 2016-17 fiscal year, which dampened Sterling demand further.
Suren Thiru, economics head at the British Chambers of Commerce (BCC) stated of the report;
‘Government borrowing in November, while higher than expected, was still marginally lower in annual terms. Despite the slight improvement, debt levels remain unsustainably high.
2017 is likely to be a challenging period for the UK’s public finances, with economic growth likely to soften, which will hamper the UK’s ability to generate tax receipts.’
EUR GBP 2016 Exchange Rate Forecast to see Slow and Steady Advance
With Thursday’s economic calendar relatively quiet, the EUR GBP 2016 exchange rate is likely to continue on its current trajectory of edging higher throughout the day, with some key factors holding the Euro back from making stronger gains, however.
Thursday morning will see the publication of the European Central Bank’s (ECB) final economic bulletin of 2016 and, while it is unlikely to weaken the Euro so soon after the ECB extended its easing package in its December meeting, any surprises could influence EUR trade.
There’s also the strength of the US Dollar of course. Slews of typically influential US data will be published on Thursday and if data improves demand for USD following Wednesday’s selloffs this could potentially weaken demand for the negatively correlated Euro.
As for Sterling, there’s simply not much in the way of upside factors for GBP investment this week.
Unless fresh Brexit comments from UK or EU leaders give investors a new burst of single market hopes, the Pound’s movement is likely to remain relatively limp until at least Friday, when the UK’s final Q3 Gross Domestic Product (GDP) results will be published.
As it stands, the EUR GBP 2016 exchange rate is on a gradual upwards trajectory and could continue to do so for the rest of the week depending on the strength of the US Dollar.