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Euro Pound Exchange Rate Drops Drastically, Are GBP’s 2016 Best Levels Ahead?

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  • Euro Pound Exchange Rate Drops over 2 Pence – Swing towards pro-EU sees Pound rally spectacularly.
  • Euro sees Slight Boost – Sterling’s performance sees Brexit fears diminish, Eurozone confidence increases.
  • Labour MP Jo Cox’s Murder Continues to Make Waves – Analysts believe tragic event may cause undecided voters to lean towards ‘Remain’.
  • Forecast Appears Positive With Pro-EU Sentiment Mounting – Polls indicate a shift towards ‘Remain’ as the referendum date draws near.

Yesterday saw a massive decline for the Euro Pound exchange rate as both ‘Remain’ and ‘Leave’ campaigns resumed following the harrowing murder of Labour MP and mother of two Jo Cox.

A poll-indicated shift towards pro-EU sentiment within the UK caused the Pound to rally an average of at least 1% across the board and even higher against some currencies. Implied probability of the UK remaining has increased 7 points to 67% and Bookmakers have been increasing their odds of a ‘Remain’ win.

The Pound Euro exchange rate rallied all the way to 1.30 over the course of the European session, an impressive turnaround given the lows recorded last week.

The Euro Pound exchange rate continued trending lower despite sturdy gains in the ZEW economic sentiment surveys for Germany and the Eurozone.

(Previously updated 08:00 21/06/2016)

News from the UK has bolstered the Euro due to fears being stifled somewhat and confidence increased thanks to the Pound’s rise as can be seen in the Euro’s 0.43% increase against the US Dollar, a 0.8% increase against the Yen and a 0.45% increase against the Swiss Franc.

EUR Sees Slight Boost but Euro Pound Exchange Rate Gutted due to GBP’s Meteoric Rise

As the Pound’s value skyrocketed, the Euro gained some confidence from speculation the Eurozone may not suffer as a result of a UK exit from the European Union. The Pound saw such gains, however, that the Euro Pound exchange rate was absolutely gutted.

Before last Thursday’s tragic murder of Ms Cox, the Euro traded against the Pound at a high last seen in early April. As soon as the news of her death permeated the market the rate started trending downwards and slid even further during Monday’s session.

Instantaneously, as the market opened yesterday morning, the Euro saw a depreciation of over a penny against the Pound. Support for the ‘Remain’ camp was bolstered after it became clear that Jo Cox’s murderer had tenuous connections to Britain First, a notoriously right-wing organisation that also supports a ‘Brexit’. Analysts figure that voters who were on the fence may have been pushed towards ‘Remain’ in an effort to distance themselves from the violence.

Pound (GBP) sees Phoenix-Like Rebound thanks to Increasing Pro-EU Sentiment

Yesterday was a miraculous day for Sterling, with the Euro Pound exchange rate struggling notably as the Pound rallied against all of its most-traded currency peers.

Already gaining strength over the weekend, the Pound saw gains of over two cents against the Euro as polls indicated that anti-Brexit sentiment was rising following last Thursday’s horrific events. GBP/EUR enjoyed its biggest one-day rise in over seven years. This increase in confidence bodes well for the Pound and for the ‘Remain’ campaign. Studies show opinion tending to favour the status quo as the vote approaches and Mujtaba Rahman of Eurasia Group had this to say:

‘The British public is risk-averse and, absent a well-articulated plan for EU exit, is still more likely to opt for the status quo… Historical analysis of six previous referenda in the UK (most prominently on the Alternative Voting system, devolution and Scottish independence) since 1975 show a tendency for a hefty swing towards the status quo in the run-up to polling day – a trend we are beginning to see from this weekend’s polling.’

However, the likes of chartered financial analyst Louise Cooper warn against assuming a ‘Remain’ victory in light of the latest data. Cooper claims that most of the movement has been caused by automatic trading carried out by programs being triggered by ‘various technical levels’. She continues to mention that the ‘real players’ (i.e. corporates and pension funds) are sitting on the side lines for the most part.

Thursday’s UK EU Referendum Keeping Currency Forecasts Clouded

Forecasting the Euro Pound exchange rate’s future performance using ecostats may turn into an even more tenuous art as all focus will be on the UK’s EU referendum on Thursday.

Since polls have been showing a shift towards ‘Remain’ (and some analysts predict more pro-‘Remain’ support as polling day approaches) it could be pointing towards that result. If the UK public did choose to remain it could spell an instant rallying for the Pound as the worst of the uncertainty would fizzle away. Conversely, in the event of a ‘Brexit’ it is widely accepted that the Pound would tumble severely, with worst case scenarios predicting a staggering 20% drop in value. (Goldman Sachs, HSBC estimates)

With little UK data to be ignored under the shadow of the referendum, Eurozone data is fairly plentiful.

If German and Eurozone business and economic surveys print favourably we could expect to see some strengthening for the Euro. More potential lies, however, within the various sector PMIs set to be released by Markit on Thursday as we would expect overwhelming positive data prints would afford a decent rally for the Euro.

The data released on Thursday has a good chance to be overshadowed by the UK’s referendum as the noise from that issue is likely to drown out any other factors.

At time of writing the Euro Pound exchange rate seems to becoming somewhat steady at around the 0.77 mark.