The Euro has returned to its earlier high exchange rate of 0.85 against the Pound today, following the forecast-meeting outcome of the first French presidential election vote.
The hope that Emmanuel Macron will build on his voting momentum and clinch the presidency has largely kept the Euro afloat, with rising IFO German confidence scores further pushing up demand.
A Macron presidency is by no means assured, however, so it will be logical to keep a close eye on any polls that point to Marine Le Pen claiming victory in May.
(First published 09:18, April 24th, 2017)
The Euro jumped from 0.83 to 0.85 against the Pound today, before easing back to 0.84.
The EUR/GBP exchange rate surge comes after the first round of French presidential election voting. In a historic moment, two establishment outsiders, centrist Emmanuel Macron and far-right Marine Le Pen, are both just one step away from being named President of France.
In broad terms, a Macron victory is expected to be the best possible outcome for the Eurozone and EU, given Macron’s policies of furthering EU integration. Speaking after taking the highest first-round number of votes, Macron stated;
‘I want to become the president of all the people of France, the president of the patriots in the face of the threat from the nationalists’.
These nationalists, represented by Front National’s Marine Le Pen, could still upset current Eurozone positivity if they steal victory after May 7th’s second vote.
Le Pen has been outspoken in her anti-EU sentiment, declaring that voters should;
‘Join us and…abandon ancient quarrels and…concentrate on what is essential for our country’.
Le Pen’s policies include taking France out of the single currency union, as well as holding a referendum on France’s status as an EU member.
As well as the dominant Euro pushing the Pound down this week, Sterling has also stumbled due to last Friday’s weak domestic data.
Retail sales in March fell in all fields, dropping into negative ranges on the month.
Coupled with above-central bank target inflation levels and glacial wage growth, retail activity may worsen further in the near-term.
Most immediately, this could mean slowing GDP growth on Friday, which may cause significant Pound to Euro losses at the end of the week.
The Euro may rise further against Sterling if polling data shows a strong Macron victory in May. More immediately, French business confidence growth could move the Euro on Tuesday. Current forecasts are for no change from 104.
Sterling’s poor performance could get worse in the near-term, with Confederation of British Industry (CBI) industrial and business optimism stats out soon.
Industrial orders in April are forecast to drop from 8 points to 5, while a similar fall is predicted for Q2 business optimism.
Current Interbank EUR GBP Exchange Rates
At the time of writing, the Euro to Pound (EUR GBP) exchange rate was trading at 0.84 and the Pound to Euro (GBP EUR) exchange rate was trading at 1.17.