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Euro Pound 2017 Exchange Rate Plunges This Week on Brexit Confidence

  • Euro Pound 2017 Exchange Rate Weakens to 0.86 – Largely due to Sterling strength
  • ECB’s Draghi Disappoints – Euro falls after Draghi takes dovish stance
  • EUR Forecast: Euro may be Influenced by Trump Action – Trump’s first weekend as US President ahead
  • GBP Forecast: UK Growth Data Next Week – As well as public borrowing results

Euro Pound 2017 Exchange Rate Sees Little Change Ahead of US Trump Inauguration

The Euro Pound 2017 exchange rate trended within a relatively tight region for most of Friday’s European session. While the Euro saw brief advances, the pair generally remained close to opening levels.

EUR GBP looked on track to end the week over half a penny below the week’s opening levels, but if Trump’s inauguration speech includes mention of fiscal policy markets may be sent into a late-week-panic.

Next week the Euro could be influenced by movement in the US Dollar, while Sterling is likely to advance if UK Supreme Court upholds the High Court’s ruling on Article 50.

[Published 11:41 GMT 20/01/2017]

The Euro Pound 2017 exchange rate has plummeted in the last week and looks to end the week lower. Markets perceive a newfound optimism from the UK government over Brexit, while the week’s ECB news has disappointed Euro investors.

EUR GBP opened on Monday trending at the level of 0.87 but plunged to 0.86 midway through the week and ended the week near these lows.

Euro (EUR) Limp after ECB’s Dovish Draghi

The Euro performed decently for most of the week due to optimistic Eurozone ecostats. However, on Thursday the European Central Bank (ECB) held its first policy meeting of 2017 and ECB President Mario Draghi held his first press conference of the year too.

The bank’s policy decision contained no surprises. Policymakers agreed as expected to leave the Eurozone interest rate and quantitative easing schemes frozen at their previous levels.

However, Draghi took an unexpectedly dovish tone during his following press conference. Despite improving inflation in the Eurozone in recent months, Draghi stated that inflationary pressures remained subdued. He claimed;

‘There are no convincing signs yet of an upward trend in underlying inflation. The Governing Council will continue to look through changes in inflation if judged to have no implications for the medium-term outlook for price stability.’

Draghi went on to say that the economic outlook for the Eurozone bloc still contained many downside risks.

This tone was highly disappointing to markets, who had hoped that stronger inflation figures from the Eurozone, as well as a stronger US inflation outlook this year, would have increased Eurozone inflationary pressures.

As a result, demand for the Euro fell towards the end of the week. The imminent inauguration of Donald Trump as the next US President also left EUR jittery.

Pound (GBP) Slips as UK Retail Sales Plummet

After weeks of strong UK ecostats, Friday saw the publication of Britain’s December retail sales results, which shocked markets with a sudden slowing in consumer buying.

Despite a strong November for retail sales, as well as upbeat reports from UK retailers, sales excluding fuel unexpectedly fell -2.0% month-on-month. A slip of -0.3% was expected, but this large drop shook GBP confidence slightly.

The year-on-year retail sales figure worsened from 6.6% to 4.9%, despite being predicted to increase to 7.6%. According to Alan Clarke from Scotiabank;

‘We know from the CPI [inflation] data earlier in the week that prices rose more than expected in December and now we also know that sales volumes fell. This is likely to be the theme for the rest of the year – higher prices will reduce disposable income and hurt consumer spending growth.’

While the Pound saw a modest drop on Friday, the British currency looked to end the week far higher against the Euro due to the week’s confident Brexit speeches from UK Prime Minister Theresa May.

Euro Pound 2017 Forecast: Trump Inauguration to affect Monday’s EUR GBP Movement

Donald Trump is set to become the 45th President of the USA on Friday evening and analysts have wide ranging expectations of what the global economy can expect as a result of his leadership.

Investors already rushed to ‘safe haven’ currencies during Friday’s European session as they looked to protect their assets from the potential of high volatility during Trump’s first week in power.

Any action or even lack of action Trump takes over the weekend could cause big tremors in the global forex market.

This is particularly likely to affect the Euro in the EUR GBP exchange rate. Any increased hopes of higher interest rates in the US in 2017, compared to the European Central Bank’s (ECB) dovish outlook on policy, could leave the Euro weaker.

As for the Pound, Sterling may be sold from its recent highs if Brexit confidence fades, but it is likely markets will remain more confident on the process for at least a few more sessions.

Monday will be quiet for domestic data, leaving EUR GBP traders to react entirely to Trump news.

Tuesday will see the publication of Markit’s preliminary January PMIs for the Eurozone as well as the UK’s December public borrowing figures.

EUR GBP Interbank Rate

At the time of writing, the Euro Pound 2017 exchange rate trended in the region of 0.86, while the Pound Euro exchange rate trended at around 1.15.