- EUR GBP Falls on Surprising US Dollar Strength – Shock of Trump victory subsides.
- European Bank Shares Rise – Euro may rally if Trump is committed to easing regulations.
- Trump to Make ‘Brexit’ Trade Deal? – Markets speculate on what Trump presidency may mean for ‘Brexit’.
- RICS House Price Balance Report Impresses – Pound unlikely to rise due to global uncertainty however.
The EUR GBP exchange rate slumped by around three cents yesterday as the Euro (EUR) was pressured by an unexpected rally in the US Dollar (USD), following the shock victory for Republican candidate Donald Trump in the US presidential elections.
Euro Pound (EUR GBP) Slides as Trump Jump Continues
As the most traded partner against the US Dollar, the Euro was caught unaware by the surprise rise in USD yesterday, dropping against the Pound as markets reacted positively to Trump’s victory speech.
Investors were encouraged by Trump’s ‘presidential’ tone in his speech as he reined in his usual wall-building rhetoric and instead congratulated his Democratic rival Hillary Clinton on her well run campaign.
This has lead to speculation that many of Trump’s divisive policies were simply to gain the populist vote and whether he will be more reserved now he is the president elect.
Euro May Strengthen after Bank Shares Rise
There might be a silver lining for the Euro however as shares in European banks have begun to rally whilst markets speculate on whether Trump will attempt to ease some of the regulations imposed on banks after the 2008 financial crisis, telling told Fox News during his campaign that;
‘We have to get rid of Dodd-Frank. The banks aren’t loaning to people that need it. The regulators are running the banks.’
Dodd-Frank was the legislation that was brought in protect consumers and to prevent banks from becoming too big to fail, however it is unclear what Trump’s plans would be as simply tearing up the legislation could lead to banks repeating the same mistakes again.
Pound Upbeat as ‘Brexit’ Sentiment Improved by Trump Presidency
The Pound has also received a slight boost following Trump’s victory in the US election as ‘Brexit’ sentiment was improved by comments Trump made back in May. When talking about a possible trade deal between the UK and the US he said, ‘you’d certainly not be at the back of the queue, that I can tell you’.
However it remains unclear how much priority Trump would put in forming a trade agreement with Britain once it leaves the EU as his campaign was mainly focused on the US’s trade with China and he has been especially critical of free trade agreements, which he blames for the decline in US manufacturing.
EUR GBP Exchange Rate Forecast: UK House Data Unlikely to Have Much of an Impact
The EUR GBP exchange is likely to continue to trade at similar levels for the remainder of the week as the markets still recover from the shock of Donald Trump winning the US election. Investors are likely to wait for the dust to settle and for some concrete news on Trump’s plans before any major movements are made.
This means that today’s RICS UK house price balance report is unlikely to provide much catalyst for movement in the currency pairing despite an impressive rise from 18% to 23% in October.
Meanwhile Germany’s consumer price index, due for release tomorrow, is equally unlikely to cause any notable changes in the EUR GBP exchange rate, as global uncertainty paralyses market movement.
Current Interbank Exchange Rates
At the time of writing the EUR GBP exchange rate was trending around 0.87 and the GBP EUR exchange rate was trending around 1.13.