- GBP EUR 2017 Exchange Rate Plummets on Brexit Fears – Pound Euro near 1.15 on Wednesday
- UK PM Attempts to Calm Markets – Investors want single market access, May hints at new deal
- UK Data Mixed – UK trade balance shows shocking deficit
- EUR Forecast: Limp Euro Trade Expected – Lack of Eurozone data to leave Euro benefitting from weak Pound
GBP EUR 2017 Exchange Rate Largely Flat on Wednesday
As Wednesday’s European session drew to an end, market focus turned away from the GBP EUR 2017 exchange rate and towards US markets as President-elect Donald Trump held his first press conference since being elected.
Ultimately little movement occurred in GBP EUR throughout the day. Sterling was held back from its best levels by the day’s UK deficit figures but was bolstered by Brexit hopes and solid production results from November.
Britain’s manufacturing production result came in at 1.2% year-on-year, where industrial production improved to 2% and construction output came in at 1.5%. The construction result was solid, but fell short of the forecast 2%.
(Previously updated 14:00 GMT 11/01/2017)
The GBP EUR 2017 exchange rate trended with a light downside bias on Wednesday morning after recovering around half a cent on Tuesday evening. The pair trended above the level of 1.15 but briefly dipped to 1.14 at various points.
Wednesday’s UK data was too mixed to give the Pound a significant boost. November’s UK trade deficit results especially were a disappointed. Already predicted to suffer a drop to -£3.5b, the figure instead came in at a shocking -£4.17b.
Demand for the Euro was comparatively limp amid a lack of fresh Eurozone ecostats and increased strength in the US Dollar.
GBP EUR could see a more solid recovery in the coming days if news continues to indicate that the UK Supreme Court will uphold the High Court decision that the Brexit process must be activated through Parliament rather than by the UK government alone.
This could delay current plans to activate Article 50 in March.
Any delay would give the government more time to work up a negotiating strategy, potentially strengthening the UK’s position before discussions start in earnest.
(Previously updated 8:57 GMT 11/01/2017)
GBP EUR 2017 Exchange Rate Up from Worst Levels
While the Pound to Euro exchange rate continued to perform poorly throughout Tuesday’s European session, it was able to move away from the week (and 2017’s) worst trade levels before the close of the European session.
Sterling’s weekly selloff softened later in the session and traders bought new GBP short positions.
The Pound was also bolstered slightly by news that Britain’s opposition political party, Labour, came out in support for post-Brexit single market access.
This has improved market hopes that a vote for single market access to be part of Brexit negotiations will make it through commons if a vote on Brexit negotiations is held.
However, with Labour chief Jeremy Corbyn’s comments being criticised by some and the activation of Article 50 only weeks away, whether or not the Pound can be prevented from falling to new lows against the single currency remains to be seen.
On Wednesday the UK is set to publish manufacturing and industrial production figures and these reports may give GBP a lift if they show improvement.
(Previously updated 15:48 GMT 10/01/2017)
Movement in the GBP EUR 2017 exchange rate continued to be muted on Tuesday morning, as investors continued to react to Brexit concerns by selling Sterling off.
The pair fell to a two-month-low of 1.14 early in the day. While Sterling emerged from this new 2017 low in the early afternoon, it still remained below Monday’s levels.
No influential data was published on Tuesday, leaving the Euro relatively limp which allowed Sterling to recover from its worst levels when markets cooled slightly.
In fact, data has had little part to play in the Pound’s performance so far this week, with investors instead focusing on the latest Brexit related news.
That news included the fact that former UKIP leader Nigel Farage criticised Theresa May’s ability to handle the UK’s exit from the European Union.
Farage has been fairly vocal since the UK voted to leave the EU and, in his view, planning the country’s exit is in the wrong hands.
— Nigel Farage (@Nigel_Farage) January 10, 2017
(Previously updated 11:42 GMT 10/01/2017)
The GBP EUR 2017 exchange rate plummeted on Monday as investors reacted to the weekend’s Brexit comments from UK Prime Minister Theresa May. May stated the UK would not simply be able to keep ‘bits’ of EU membership benefits, leading to new fears over access to the single market.
GBP EUR opened the week at 1.16, but quickly plummeted to 1.15 when markets opened. The pair hit its worst levels since November 2016 on Monday morning.
Are further lows likely for the pairing? Well, that largely depends on the tone adopted by other government officials over the next few weeks. If it begins to look increasingly unlikely that the UK will retain access to the single market post-Brexit, significant GBP weakness is the likely result.
According to TorFX analyst Josh Ferry Woodard;
‘The Pound suffered big losses in October when May initially suggested that Britain could opt to tighten immigration at the expense of single market membership. However, Sterling managed to claw back those losses thanks to soothing comments from government officials that appeared to backtrack on so-called ‘hard Brexit’ plans and left the door open to a ‘soft Brexit’ that would include access to the single market.
If ministers can convince investors that a ‘soft Brexit’ is still on the cards then we could see the Pound rebound swiftly. However, if the government sticks to the ‘hard Brexit’ rhetoric then we could see further losses as jittery investors pull out of the Pound.’
He also noted;
‘PM May’s comments on controlling UK borders were met by a warning from German Chancellor Angela Merkel, who said that Britain would only gain limited access to the single market if it did not adhere to the EU’s four basic freedoms – free movement of goods, capital, services and people.’
Over the course of Tuesday’s European session the Pound Euro exchange rate fluctuated between 1.1499 and 1.1404, generally holding below the day’s opening levels despite the BRC like-for-like sales figure coming in at 1.0%.
Pound (GBP) Undermined as May’s Brexit Comments Lead to Market Panic
Sterling lost almost 1% against the Euro on Monday as investors sold the British currency off in reaction to the weekend’s Brexit news.
UK Prime Minister Theresa May had taken part in an interview with Sky News in an attempt to defend her government against claims that its Brexit stance was ‘muddled’.
During the interview on Sunday with Sophy Ridge of Sky News, Theresa May stated;
‘We mustn’t think about this as somehow we’re coming out of membership but we want to keep bits of membership. What we will say is what is the right relationship for a United Kingdom that is no longer a member of the European Union?’
On Monday the Prime Minister followed up these comments by attempting to calm market reaction. She again reasserted that the UK government was aiming to get the best possible deal for the UK in terms of EU trade, but this did nothing to help GBP EUR recover.
Kathleen Brooks from City Index argued that May’s comments were simply causing more confusion amongst investors rather than clarifying anything;
‘This ‘back-pedalling’ has done nothing to reverse the decline in the Pound, which dropped to a low of 1.2125 (against the US Dollar) before lunchtime, and instead makes it likely that further interviews with the Prime Minister will become even harder to score, due to her far from clear message about what Brexit will entail.’
Sterling actually extended its lows later in the day, proving further that May’s comments were not able to put traders at ease.
Euro (EUR) Sturdies as Monday’s Eurozone Data Impresses
The Euro performed decently on Monday;partially due to Sterling’s weakness but also because of the week’s early Eurozone stats beating expectations.
Monday’s Eurozone data included Germany’s November trade balance results, which printed a bigger-than-expected surplus of €22.6b, beating forecasts of €21.4b and improving from October’s upwardly revised figure of €19.4b.
Germany’s industrial production results also beat expectations, improving from 1.6% to 2.2% year-on-year. The Eurozone’s November unemployment rate met expectations of 9.8% in November.
Perhaps the day’s most important Eurozone report however was the Sentix January investor confidence results, which came in at 18.2 and beat predictions of a rise from 10 to 12.8.
Analysts put this increase in investor confidence down to the higher US inflation outlook for the year ahead, with many investors hoping higher US inflation will lead to higher inflation in the Eurozone too.
GBP EUR 2017 Forecast: Limp Trade Expected on Tuesday
With a lack of fresh economic data expected on Tuesday, it’s unlikely the GBP EUR 2017 exchange rate will see a significant shift from its current levels.
Lasting reaction to the weekend’s Brexit news is likely to be the primary factor behind Pound Euro exchange rate movement in the coming day, which could lead to an extension weekly lows but also see a Sterling recovery rally if investors buy up the cheaper Pound.
Some analysts predict the negativity surrounding Brexit talks has largely been priced in already and that markets may be overreacting to the weekend’s news, which could lead to a Sterling recovery rally in the coming days if investors rethink their Sterling short positions.
In terms of economic data, investors will be looking ahead to Wednesday and the latter half of the week.
Wednesday will see the publication of Britain’s November trade deficit update, as well as industrial and manufacturing production figures for November. November construction output results will also be posted.
Later in the week, the publications most likely to influence the GBP EUR 2017 exchange rate will be NIESR’s UK growth projection for December, as well as the European Central Bank’s (ECB) latest meeting minutes.