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Euro Pound Close to Two-Month Low as Le Pen Aides Meet with Banks to Discuss ‘Frexit’ Plans

A meeting between advisors to Marine Le Pen and analysts from BlackRock Inc, Barclays Plc, UBS Group AG and other financial groups caused the EUR GBP exchange rate to tumble.

While it is not unusual for financial institutions to meet with candidate aides from political parties ahead of an election, it is the first time that members of Le Pen’s team have been invited, signalling that big banks now see her as a credible candidate to win the French presidential election.

Le Pen’s chief economic adviser, Bernard Monot, said;

‘These strategists see that Le Pen may be the next president of France and they are doing their due diligence. They’re very much looking for a detailed account of our plans.’

The news was yet another heavy blow for the Euro as a victory for Le Pen in May’s run off could potentially prompt a crisis for the single currency as she plans to hold a referendum on France’s EU membership, which could see the second largest economy on the continent break away from the Eurozone.

While polls still show her losing to independent front-runner Emmanuel Macron in the second round, Le Pen has rapidly been catching up to her rival as her focus on security has garnered a lot of support for her National Front party following a number of deadly terrorist attacks in recent years.

EUR GBP saw a slight uptick on Friday morning however as France’s latest Consumer Confidence report held at a nine-year high of 100 in February.

Sentiment was lifted by the improvement in the labour market, with consumers apparently upbeat despite the rising political uncertainty in the Eurozone and fears that France could leave the Euro.

However Italy’s own consumer confidence report painted a far gloomier picture as it fell from 108.6 to 106.6 over the same period, disappointing analysts who expected it to rise to 109 as the recent bailing out of the nation’s third largest bank, Monte dei Paschi and expectations that Italy will face a general election later this year weighed on sentiment.

Meanwhile an unexpected rise in the number of Mortgage Approvals in January helped strengthen the Pound.

The British Bankers Association (BBA) reported that loan approvals for house purchases reached a twelve-month high of 44.7k at the start of the year, up from 43.6k in December and significantly outpacing predictions that it would fall to 41.9k, with Eric Leenders of the BBA attributing the rise to the low interest rate;

‘The new year saw homeowners make the most of historically low interest rates by taking advantage of competitive re-mortgage offers. Nearly 29,000 of these deals were approved last month – 16% higher than January last year.’

The rise will help to dispel worries that the concerns surrounding Brexit will cause consumers to hold off on investing in the UK property market.

Looking ahead, EUR GBP is likely to remain volatile over the next few weeks as market uncertainty reaches breaking point.

In terms of the Euro, the Dutch elections are likely to remain a concern for investors next month as despite recent setbacks for the far-right leader of the PVV party Geert Wilders, he is still neck and neck with current Prime Minister Mark Rutte.

Meanwhile, the Pound is likely to be rocked by preparations to leave the EU as Theresa May plans to invoke Article 50 and begin the formal Brexit process by the end of March.

Current Interbank Exchange Rates

At the time of writing the EUR GBP exchange rate was trending around 0.84 and the GBP EUR exchange rate was trending around 1.18.