- EUR GBP Exchange Rate Above 0.90 – Further advances could be limited
- Monday’s Eurozone News Impresses – German trade, Eurozone investor confidence beat expectations
- Eurozone Economic Sentiment Scores Impress – October surveys from ZEW
- Forecast: Will Sterling Weakness Last? – ‘Hard Brexit’ concerns keep GBP advances limited
EUR GBP Exchange Rate Edge Higher Again on Wednesday
After plunging to new lows on Tuesday night, Sterling began Wednesday’s European session with a solid boost of support thanks to news that UK Prime Minister Theresa May was planning a Parliamentary debate on Brexit negotiations.
May had previously been criticised by some MPs due to her insistence that there would be no MP vote on the Brexit or on Article 50.
However, while this was initially seen as something of a ‘U-turn’, May reiterated on Wednesday afternoon that there would be no vote, and that the debate would not necessarily change her government’s Brexit plan. As a result, the increasingly Brexit-correlated Sterling floundered on its recovery attempts.
Later in the session the currency was weakened further as a speech by Brexit Secretary David Davis left markets and MPs with more questions than answers on what exactly the government’s Brexit plan was. Davis was criticised by some MPs and analysts for this lack of clarity, critics claiming it was spooking the markets.
The Euro was able to hold its ground against Sterling for most of the day thanks to solid Eurozone industrial production scores for August.
Despite this, a strong US Dollar as well as concerns that the European Central Bank (ECB) will be leaving monetary policy ultra-loose for an extended period of time prevented the Euro from completely capitalising on Sterling’s weakness throughout the day.
(Previously updated 16:41 BST 11/10/2016)
EUR GBP Exchange Rates Attempt to Advance on Tuesday Afternoon
After briefly allowing the Pound to recover from the day’s lows, the Euro trended more strongly on Tuesday afternoon as investors adjusted their levels on the day’s news.
US markets re-opened for the first time since last week, as both the US and Canada had been observing the Columbus Day public holiday on Monday.
Another increase in demand for the US Dollar following the weekend’s US Presidential race news caused the US Dollar to strengthen, taking value from its rival the Euro.
However, later in the session, Pound investors once again gave up on buying the British currency up from its cheapest levels. Investors readjusted their positions on the Euro and US Dollar, and by the end of the European session the EUR GBP exchange rate was once again trending near its best levels since 2010.
(Previously updated 12:39 BST 11/10/2016)
EUR GBP Exchange Rate Hovers Near Best Levels on Tuesday Morning
The Euro to Pound exchange rate held its ground near its best levels this week despite continued attempts from Sterling to improve. Some investors bought the British currency from its cheapest level, but this limited movement into the Pound was unable to give it any sustained gains.
ZEW’s economic sentiment survey reports for October all impressed, helping the Euro to trend a little more sturdily than it had on Monday throughout the morning. Germany’s current situation score jumped from 55.1 to 59.5, while economic sentiment improved from 0.5 to a solid 6.2.
The EUR GBP exchange rate could continue to trend around these levels for the remainder of the day. However, as US markets will open for the first time since last week, the Euro could be weighed down slightly by higher USD demand.
(Previously updated 10:27 BST 11/10/2016)
Tuesday morning’s EUR GBP exchange rate movement was little changed from Monday’s, as Sterling continued its struggles to recover. The Euro was given additional support thanks to better-than-expected survey results from ZEW.
German scores came in above expectations, and overall Eurozone economic sentiment more than doubled from 5.4 to 12.3, indicating that Brexit jitters in the Eurozone bloc had faded by October.
(Published 07:00 11/10/2016)
This week’s EUR GBP exchange rate is near its best 2016 levels despite limited attempts by GBP to recover on Monday. The currency has failed to recover from Friday’s mysterious ‘flash crash’, but low Euro sentiment has allowed Sterling to advance.
EUR GBP advanced by over three pennies over the course of last week’s trade, and even settled above the key level of 0.90 EUR GBP throughout the weekend. On Monday, the pair dipped as low as -0.3% at points, but remained near this key level.
Euro (EUR) Limp Despite Optimistic Eurozone Data
The Euro struggled to hold its ground throughout Monday’s trade session, as the shared currency slipped slightly from its highs and was weighed down by the Eurozone’s own Brexit-related concerns.
Monday’s Eurozone data actually beat expectations, which helped the Euro hold its ground slightly despite lower market sentiment for the currency.
Germany’s trade surplus unexpectedly improved from 19.5b to 20b in August, thanks to surprisingly solid German exports at 5.4%, which jumped from July’s disappointing 2.6% figure.
The Euro also strengthened slightly following the publication of the Sentix October Eurozone investor confidence report. This figure unexpectedly soared from 5.6 to 8.5, beating the expected score of 6. Sentix perceived this to be due to Eurozone investors overcoming the shock of the UK’s Brexit vote.
However, Brexit concerns still weighed on the Euro thanks to comments made over the weekend by European Central Bank (ECB) President Mario Draghi. Draghi stated that the effects of the Brexit vote had been ‘less dramatic’ than expected, however;
‘Does it mean that there will be no effect? The answer is no, we don’t know frankly what’s going to happen. The event is very significant. To think that it won’t have any consequence would be to hope for too much.’
In response to his comments, the Euro struggled to hold its best levels on Monday, leaving it to slip even against the weak Pound.
Pound (GBP) Attempts to Recover from Friday ‘Flash Crash’
The Pound drifted higher on Monday from its Friday lows, as some investors bought the currency while it was weak. However, amid ongoing concerns that Britain is heading for a ‘hard Brexit’, markets are hesitant to give the Pound much attention.
Sterling slumped to new recent lows across the board on Friday, in a sudden ‘flash crash’ that saw the currency’s value plummet within moments.
The causes are still largely unknown, but analysts speculate it could have been caused by anything from a human ‘fat finger’ error, to an error in automatic trading algorithms.
While investors would typically buy Sterling back from its cheapest levels after a fall like that, expectations of a ‘hard Brexit’ left the currency unappealing.
Traders are still concerned about the future of Britain’s economy after leaving the European Union’s single market during the Brexit process.
Some analysts also suggest that the British Pound is becoming an increasingly politically-aligned currency, seeing more movement in response to political ties and Brexit news than economic data.
EUR GBP Exchange Rate Forecast to Slip Further unless ZEW’s Eurozone Stats Impress
Tuesday’s session will have ample opportunity for Euro investors to adjust their levels, as Eurozone markers will be focused on the day’s economic sentiment survey results from ZEW.
ZEW will be publishing survey results for October, including economic sentiment scores for Germany and the Eurozone as a whole.
Germany’s current situation score is expected to have improved slightly from 55.1 to 55.5, while the economic sentiment score is expected to gain from 0.5 to around 4.
If these scores meet or beat expectations, Euro sentiment could recover slightly from its mixed Monday movement. This would allow the shared currency to hold its best 2016 levels against the Pound.
Britain’s economic calendar remains relatively barren in comparison, which will leave Sterling floundering on market sentiment once more.
GBP’s best chance of recovering on Tuesday or Wednesday will be if markets cool on this month’s ‘hard Brexit’ concerns, which have dominated Pound trade since the beginning of last week.
The Pound’s value is considerably low after last Friday, meaning it has strong buy-back potential if markets drop the current distaste towards the currency. Otherwise, GBP could continue to trend poorly and remain near its 2016 worsts.
As the week’s sole influential UK dataset does not publish until Thursday, it is likely that Eurozone data and Brexit-jitters will drive the EUR GBP exchange rate this week.