- EUR GBP Volatile after Trump Victory – Exchange rate likely to fluctuate as the day continues.
- December Fed Rate Hike – Euro may gain as bets on a December Fed rate hike potentially drop.
- Euro Exchange Rate Forecast – Markets likely to ignore data in wake of shock US election result.
The EUR GBP exchange rate briefly spiked this morning as the currency market was turned on its head by a surprising victory for Republican candidate Donald Trump in the 2016 US presidential elections.
Euro Pound (EUR GBP) Fluctuates due to Global Uncertainty of Trump Presidency
The Euro Pound (EUR GBP) exchange rate made significant advances earlier this morning as demand for the single currency was bolstered as investors fled the US Dollar (USD) when it became clear that political outsider Donald Trump would become the next US president.
Markets fear what impact a Trump presidency may have on the US economy due to the political uncertainty that he creates. As explained by George Saravelos of Deutsche Bank;
‘There is an unambiguous rise in policy uncertainty and the key question is how much does this impact near-term US and global growth. Both the Fed and the markets will be closely scrutinizing upcoming releases.’
The Pound was able to recover much of the ground lost against the Euro later on however as markets calmed after Trump’s victory speech, which was seen as more ‘presidential’ than some of his recent rhetoric on locking up his Democratic rival Hillary Clinton and building walls. As Kathleen Brooks of City Index said;
‘In fact, one could argue that this outsider has delivered an establishment-style victory speech, which is soothing stressed markets. Could the Markets be hoping that he may actually be more establishment and less maverick than he portrayed himself throughout the campaign?’
However this is unlikely to be the end of the volatility in the global currency markets as investors are just begining to digest what impact the election result will have.
Euro May Gain as Bets Potentially Decline on a December Rate Hike
One major impact will be whether or not the Federal Reserve will continue with its plan to raise interest rates in December – as it had been widely predicted to do before the election – or if Fed Chair Janet Yellen will even remain in her position after some fierce criticism from Mr Trump in recent months.
Markets are also unsure on just how much power Trump will wield. Despite him enjoying a Republican controlled congress as his party retained it majority in the House of Representatives, it is unclear how much his party may support him on some of his more outlandish campaign pledges if he does attempt to implement them.
With EUR USD being the most traded currency pairing in currency markets, it is highly likely that any major movement for the US Dollar over the coming days will cause an equal amount of movement in the Euro – which in turn will impact the EUR GBP exchange rate.
EUR GBP Exchange Rate Forecast: Investors Likely to largely Ignore Data for the Remainder of the Week
The EUR GBP exchange rate is almost guaranteed to remain shackled to market sentiment over the shock result of the US presidential election over the next few days as investors react to the far-reaching impact that it will have on the US economy.
Meanwhile, markets are expected to largely ignore any ecostats coming out of both the UK and Europe as evidenced by the lack of movement this morning following a lacklustre British trade balance report, which showed a disappointing drop from -£3768 to -£5221 in September.
Current Interbank Exchange Rates
At the time of writing the EUR/GBP exchange rate was trending around 0.89 and the GBP/EUR exchange rate was trending around 1.12.