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Euro Pound Exchange Rate Forecast: Eurozone Vote Jitters Weaken EUR GBP

  • Euro Pound Exchange Rate Struggles to Hold Ground – Remains near region of 0.84
  • Eurozone Ecostats Meet Expectations – German unemployment and Eurozone CPI steady
  • Eurozone Employment Impresses – But political concerns weigh EUR down
  • UK Construction PMI Beats Expectations – Rises from October
  • Forecast: Big Week Ahead in Eurozone – Political votes and ECB meeting

Euro Pound Exchange Rate Slips again on Friday

Sterling appeared more solid on Friday afternoon compared to Thursday, and EUR GBP looked on track to end the week about half a penny below the week’s opening levels.

While the Pound failed to make it to its Thursday highs, it had a relatively smooth time bringing the Euro down a notch during Friday trade as investors sold the shared currency ahead of the weekend’s Italian and Austrian votes.

On Monday, traders are likely to react first and foremost to the results of Sunday’s votes. If the results are populist-correlated, EUR GBP is likely to plummet.

However, the Pound’s own movement could be limited by the UK government’s appeal to Supreme Court on Monday.

(Previously updated 12:40 GMT 02/12/2016)

The Euro Pound exchange rate slumped again around midday on Friday as Sterling once again headed higher on soft Brexit hopes.

This was also largely due to drops in the Euro, as investors began to sell off the shared currency ahead of the weekend’s Italian referendum and Austrian presidential re-election.

The morning’s data may have bolstered Sterling demand slightly as UK construction saw a surprising improvement in November despite expectations of the print slowing.

Eurozone producer prices on the other hand appears to have had no effect on Euro trade as expected.

(Previously updated 16:36 GMT 1/12/2016)

Euro Pound Exchange Rate Dips to Three-Month-Low on Thursday

While its gains softened towards the end of Thursday’s European session, the Pound saw significant bullishness for most of the day thanks to the day’s Brexit comments from Eurogroup President Dijsselbloem and UK Brexit Secretary Davis.

At its worst levels, the Euro Pound exchange rate had even dipped to a three-month-low of 0.83.

However, as the Pound was sold from its daily best levels in a brief bout of profit-taking, the Euro was also supported slightly by the morning’s Eurozone ecostats.

While EUR trade remained jittery ahead of the weekend’s Italian referendum and Austrian election re-run, the shared currency was offered some support by news that the bloc’s unemployment rate had fallen to 9.8% – its best level since 2009.

(Previously updated 13:01 GMT 01/12/2016)

After holding its ground for most of Wednesday and falling in the evening due to OPEC’s plans to cut oil output, the Euro Pound exchange rate plummeted again on Thursday.

Demand for the Euro remained weak due to jitters ahead of the weekend’s Eurozone political events and next week’s European Central Bank (ECB) meeting, but the volatile Sterling surged once more, easily pushing EUR GBP down.

Eurogroup President Jeroen Dijsselbloem hinted on Thursday morning that the European Union could find a way to allow the UK to remain in the internal market, while UK Brexit Secretary David Davis hinted that the UK could simply pay the EU a fee for single market access.

As hopes for post-Brexit single market access increased, EUR GBP continued to plunge. Early on Thursday afternoon, the exchange rate trended below the key level of 0.84.

(Published 07:00 GMT 01/12/2016)

The Euro Pound exchange rate trended relatively flatly on Wednesday as the day’s key Eurozone ecostats met expectations and the Pound’s movement cooled from the volatility seen earlier in the week.

EUR GBP has gained around half a cent thus far this week, edging away from its worst levels since September. Despite this, the pair has been unable to reach the key level of 0.86, although it remains above the region of 0.85.

Euro (EUR) Limits Losses as Eurozone Inflation Estimates Edge Higher

The Euro performed decently on Wednesday and was able to hold its ground against a fluctuating Pound. As a result, EUR GBP was able to hold away from Tuesday’s worst levels but struggled to trade at its weekly highs.

Wednesday’s European session saw the publication of Germany’s November unemployment results, which met expectations. Unemployment fell by -5k in November and the unemployment rate remained at a solid 6.0%.

The Eurozone’s November Consumer Price Index (CPI) projection also met expectations, rising from 0.5% to 0.6% year-on-year.

Despite these solid results, German retail sales hit a disappointing -1.0% year-on-year in October.

The Euro’s strength may also have been slightly limited by comments made by European Central Bank (ECB) President Mario Draghi in an interview published on Wednesday, at which he warned about uncertainty caused by populist movements;

‘All of these are supranational affairs that require a common response. European integration is the appropriate response, but this has become weaker in recent times, partly because of populist movements’

Pound (GBP) Fluctuates as it Calms from Early-Week Volatility

Sterling’s movement has been wide and influential thus far this week, making Wednesday’s movement look quite light in comparison.

The Pound instead fell limp and was largely only able to advance just slightly over the Euro due to underlying weakness in the shared currency this week.

Wednesday’s UK data was hardly impressive either. GfK’s November consumer confidence results fell from -3 to -8, despite being projected to only slip to -4. This marked the print’s worst figure since after the Brexit vote in July.

The Bank of England (BoE) also published its latest Financial Stability Report in the morning and while investor concerns were slightly eased by the lack of shifts in monetary policy outlook, some were slightly spooked by news that the Royal Bank of Scotland (RBS) had failed the BoE’s latest stress tests.

The bank’s stress tests are designed to emulate the conditions of a global market crash and ensure the banks are safe. After it was revealed that the RBS had performed the worst of the UK’s seven biggest high street lenders, the RBS pledged to devise new ways to cope with that hypothetical threat.

However, Sterling continued to test its strength after its mixed Tuesday recovery. This and a lack of bullishness in the Euro caused EUR GBP to trend relatively flatly throughout the day.

Euro Pound Exchange Rate Forecast: November’s Manufacturing PMIs Due Today

The key Eurozone data keeps on coming on Thursday and as a result, the Euro is once again in a position to drive EUR GBP movement.

While underlying movement in the Euro Pound exchange rate could remain limp, EUR GBP could advance on Thursday is Markit’s final November manufacturing PMI results impress traders.

Currently, analysts expect manufacturing will meet preliminary scores of 54.4 in Germany and 53.7 in the Eurozone.

Italian manufacturing is expected to have improved since October and Italy’s Q3 Gross Domestic Product (GDP) results are expected to meet preliminary figures of 0.9% year-on-year.

Lately, the Eurozone’s October unemployment rate is predicted to remain at a solid 10%.

Any deviation from expectation could influence Euro movement throughout the day. EUR GBP may make a more solid advance if these scores, particularly Eurozone PMI and unemployment, beat projections.

UK data may not be as influential. Nationwide’s November house prices figures are expected to climb from 4.6% to 4.7%, but if November’s UK manufacturing print from Markit impresses it could help the Pound resume its recovery against the Euro.

Underlying factors in both currencies could limit movement slightly. The Euro is currently being weighed down by anxiety surrounding political events in the Eurozone this upcoming Sunday, as well as the high possibility that the European Central Bank (ECB) will extend its stimulus measures in next week’s meeting.

The Pound’s strength continues to be limited by ongoing Brexit jitters, which could limit the Euro Pound exchange rate’s falls slightly even if Eurozone data disappoints.