- 2017 Euro Pound Exchange Rate Near 0.84 – Recovers from worst 0.83 levels
- Could Macron Win French Election? – New polls are optimistic for the pro-EU candidate
- Update: Eurozone PMIs Impress – But election jitters limit Euro strength
- Forecast: French Election Round One Ahead – Results of Sunday vote to influence EUR
Euro Pound Exchange Rate Largely Flat on Friday
After limited attempts to recover on Wednesday and Thursday, the Euro to Pound exchange rate looked to end the week’s European session relatively close to its worst 2017 levels.
Investors passed over the day’s strong Eurozone data and poor UK data and focused on the elephant in the room – Sunday’s first round of the French Presidential election.
Monday morning will see EUR GBP trade making huge movements as investors react to the outcome of the first round vote. While any combination of the four most popular candidates is looking like a possible outcome, here are some example scenarios;
If Macron and Le Pen advance to the second round, analysts expect there’s a pretty good chance Macron will gather support from the moderate left and right to beat Le Pen. This would be Euro positive.
A second round between Fillion and Le Pen would be similar, but some analysts have suggested this is Le Pen’s best chance of winning besides a Le Pen vs Melenchon face off.
A Le Pen vs Melenchon face off is being called a ‘nightmare scenario’ for the shared currency either way and would see the Euro plummet as ‘Frexit’ bets soar.
Generally speaking, strong success for pro-EU candidates will leave the Euro stronger next week, while a strong showing for anti-EU candidates will leave the Euro much weaker.
[Previously updated 13:00 BST 21/04/2017]
As expected, the 2017 Euro Pound exchange rate’s strength was limited on Friday due to the increasing imminence of the first round of the French Presidential election.
EUR GBP traders largely overlooked an impressive set of Eurozone PMIs from Markit, as well as a highly disappointing UK retail sales report.
The pair continued to trend in the region of 0.83, the Euro held down by French election jitters and the Pound supported by UK general election anticipation.
[Published 06:00 BST 21/04/2017]
After a surge in strength earlier in the week, Thursday saw Pound trade cool down and as a result the Euro to Pound exchange rate recovered slightly from its lows. This was also due to the latest French election polling data.
EUR GBP began this week trending at the level of 0.84 but fell to a 2017 low of 0.83 on Tuesday. On Thursday the pair briefly tested the level of 0.84 at various points as it recovered.
Euro (EUR) Benefits from Latest French Election Polls
Demand for the Euro improved on Thursday as pro-EU centrist French Presidential candidate, Emmanuel Macron, saw higher popularity in polls mere days before the first round of the election.
According to new opinion polls published by Harris Interactive on Thursday, Macron could lead in the first round of the election with around 25%.
His most popular opponent, far-right anti-EU Marine Le Pen, had 22% in the poll. The other two most influential candidates, conservative Francois Fillon and far-left anti-EU Jean-Luc Melenchon trailed slightly at 19%.
With all four candidates still close in polling figures, analysts are finding the result extremely difficult to call – especially after last year’s shocking Brexit and Trump votes.
However, some analysts argue that Le Pen is generally unlikely to win, due to the potential for a ‘republican front’ against her. Kit Nicholl from IHS Global Insight stated;
‘In a scenario where Le Pen is pitted against Fillon, or more likely, Macron, voters from the moderate left and right are likely to unite in a so-called “Republican front”, voting tactically to keep the FN out of power.
A Le Pen victory is therefore unlikely but still remains possible, particularly as abstention rates will also play a big role.’
Investors are hoping for a Macron or Fillon win – but even with Macron’s polling figures solid lately, a win for the pro-EU centrist is anything but priced in and Euro traders remain highly on edge.
Pound (GBP) Sold from Highs after UK Election Rally
The Pound surged in value on Tuesday as investors were pleasantly surprised by news that UK Prime Minister Theresa May had announced a UK general election to take place on the 8th of June.
Investors expect Theresa May’s Conservative party will expand its Parliamentary majority, giving it greater power in Brexit negotiations and potentially making the process smoother for better UK-EU relations post-Brexit.
However, as the British currency has hit its best levels in months due to the election news, some investors sold Sterling from its highs on Thursday in a bout of profit-taking.
Sterling has held most of its gains this week due to an improved UK outlook overall, but a lack of fresh supportive data as well as profit-taking stances saw it fall back from its 2017 highs.
Euro to Pound Forecast: Markets to Overlook Data ahead of French Election
While the Eurozone and UK data due for publication on Friday is typically influential, this isn’t a typical week. The Euro Pound exchange rate could be highly jittery on Friday.
The first round of France’s Presidential election will take place on Sunday and analysts are still highly unsure which two of the four major candidates will make it through to the second round.
The 2017 French Presidential election is more than an election on France’s leadership, markets are seeing it as something of a referendum on the Eurozone itself.
If an anti-EU candidate such as Marine Le Pen or Jean-Luc Melenchon were the win the Presidency, bets of a ‘Frexit’ would soar and the shared currency would quickly plummet as investors fear for the currency’s future without France.
As a result, it’s perhaps unsurprising that Friday’s Eurozone PMI data is taking a backseat for EUR traders this week.
Friday will see the publication of the Eurozone’s preliminary April PMIs from Markit, which will indicate how the bloc’s economy is faring.
If these stats impress, the Euro may advance slightly but traders may be more willing to wait for the French election results before celebrating.
The Pound is more likely to drive EUR GBP movement in comparison. If Britain’s March retail sales data impresses traders the Pound will extend its weekly gains and push EUR GBP even lower.
On the other hand, a disappointing retail sales result will increase concerns that British consumer activity is being negatively affected by rising inflation and slowing wage growth.
This would lead to a slightly weaker Pound and would allow the Euro to Pound exchange rate to recover a bit more before the end of the week.