The Euro has remained in high demand against the Pound on Monday’s afternoon session, rising by 0.5%. This continued positivity has been triggered by positive Eurozone news as well as a destabilising UK development.
Euro demand has been boosted by German Chancellor Angela Merkel, who declared that the Euro was ‘too weak’, partly due to European Central Bank (ECB) policy decisions. As if in response, the Euro jumped in demand on the news, keeping EUR GBP demand high.
In UK news, Prime Minister Theresa May has, according to some, executed a U-turn on last week’s controversial social care plans. The plans, dubbed a ‘dementia tax’, initially had a floor of £100,000 which those receiving care would keep. Despite Conservative insistence that there would be no cap to the amount paid by citizens to receive social care, May has since stated that there will be such a cap.
Whether this is a policy upending or simple clarification remains to be seen, but with many commentators calling it an extraordinary development, the Pound has ‘wobbled’ against the Euro.
(First published 09:27, May 22, 2017)
The Euro has advanced against the Pound today, with the EUR/GBP exchange rate reaching levels not seen since late March 2016. Trader optimism may evaporate shortly however, when a key decision is made on Greek debt.
- EUR GBP rate rises to 0.8622 – GBP EUR trades down at 1.1603
- Euro advances after Macron meets Italian PM – Leaders recommend unified approach to migration crisis
- Pound dips on gloomy GDP forecasts – Concerns rise over Conservative social care plans
- Hopes of ‘compromise’ on Greek debt today – Pound losses possible on government debt stats
Today’s EUR GBP advance has been caused by a mixture of growing Eurozone confidence and UK political concerns.
Among the latest supportive news has been a meeting between French President Emmanuel Macron and Italian Prime Minister Paolo Gentiloni.
The two leaders discussed the ongoing refugee crisis in Europe, as well as broader Eurozone financial problems. Gentiloni made the case for economic unity;
‘We should invest this capital of trust into shared policies on migration, and into the development of our monetary union moving towards a fiscal and banking union. It will not be…immediate…but the important thing is to begin and proceed in the right direction’.
Speaking on migration, something that continues to create tragedy across the Mediterranean, Macron added;
‘My wish is that we can move forward with real reform of the right to asylum in order to better protect the countries that are the most subjected to this migration pressure and to clarify our common rules’.
Signs of EU harmony can boost trader confidence, which could mean that further EUR GBP exchange rate gains are incoming.
In UK news, the Pound’s losses have been caused by two factors, the first being a pessimistic forecast for incoming GDP figures.
Thursday’s second estimates for Q1 GDP growth are predicted to show a major quarterly downgrade, from 0.7% to 0.3%. While the annual figure is forecast to be revised up from 1.9% to 2.1%, the quarter-on-quarter prediction has still raised concern.
Additionally, further instability has been caused by a negative reception to the so-called ‘dementia tax’ featured in last week’s Conservative manifesto.
The plan, which factors house prices into care costs, is predicted by some to drain the elderly of funds if they become seriously ill in old age. This may result in the Conservatives losing a portion of the ‘grey vote’ in June’s general election, potentially narrowing the gap between the Tories and Labour.
Today’s main Eurozone news will be a meeting to discuss the Greek debt crisis. Specifically, creditors are expected to vote on whether to grant Greece further bailout funds, following last week’s Greek approval of more austerity measures.
If the group does grant Greece another financial lifeline, the Euro could rally on the news.
The first direct UK data this week will be Tuesday’s public sector net borrowing figure, which previously showed a government deficit of -4.36bn. Forecasts have been pessimistic, for a deficit expansion to -8.15bn. If these expectations are accurate, the Pound could drop heavily against the Euro.
Current Interbank EUR GBP Exchange Rates
At the time of writing, the Euro to Pound (EUR GBP) exchange rate was trading at 0.8612 and the Pound to Euro (GBP EUR) exchange rate was trading at 1.1612.