The Pound Euro exchange rate may be in for a bout of turbulence on Wednesday, depending on how 2016’s Autumn Statement unfolds.
- GBP EUR closed at 1.16 last week – EUR GBP down to 0.85
- Pound gains seen after retail sales stats – Demand lower on Brexit implications
- Euro losses after Draghi comments – ECB President issued caution on complacency
- Caution forecast in mid-week Autumn statement – German confidence outcomes uncertain
For the Euro, the week to come is expected to be focused on PMI stats and German confidence when it comes to high-impact news.
Pound Sterling Exchange Rate News: UK Sales Figures gave Brief Boost to GBP Last Week
The Pound Euro exchange rate saw the most dramatic movements towards the end of the week, when GBP was boosted then sent tumbling against the Euro in short measure.
The good news for Sterling came on Thursday morning, when it was revealed that October’s UK retail sales results had exceeded forecasts in all fields. This sent the Pound up against the Euro to a daily high in the region of 1.16.
The bad news originated from Germany on Friday, when German Finance Minister Wolfgang Schauble claimed that;
‘Until the UK’s exit is complete, Britain will certainly have to fulfil its [economic] commitments. Possibly there will be some commitments that last beyond the exit […] even, in part, to 2030. Also we cannot grant any generous rebates. These rules apply to all, whether EU members or not’.
This was a major blow to ‘Brexiteers’, many of whom had been swayed by the argument that by leaving the EU, the UK would have more financial freedom.
Euro Pound Exchange Rate Softness Triggered on Dovishness from ECB President Draghi
While the Euro was able to capitalise on the Pound’s losses at the close of last week, this advance was not universal given that the single currency was facing difficulties of its own.
The mixed overall performance came from a speech given by European Central Bank (ECB) President Mario Draghi on Friday.
Draghi issued a summary of the Eurozone’s economic performance so far in 2016, highlighting favourable levels of growth but also warning about complacency due to the underlying pessimistic forecasts.
Earlier in the week, ECB officials had stated that they would be waiting until December before making policy decisions, something that added pressure onto November’s remaining announcements to come out positively.
Future GBP EUR Forecast: Autumn Statement Expected to be Cautious, Pound Losses Possible
The coming Wednesday is set to see Chancellor Philip Hammond make his first Autumn Statement, which is broadly forecast to be a dovish affair.
Given the present bubbling uncertainties about Brexit and Article 50 in particular, the Chancellor isn’t expected to bring anything especially radical to the table; the main expectation is for more spending and less austerity, though at the cost of increasing the already-sizable budget deficit.
Should Hammond’s safe hands disappoint bullish investors, they may well turn from Sterling, leaving it to flop against the Euro.
On the Eurozone side of things, the big news is due over Tuesday to Thursday. Tuesday will bring a pessimistically-predicted consumer confidence flash for November, while Wednesday’s news is set to see the Eurozone services PMI for November fall.
Thursday’s news will be the German November Ifo business climate figure, which is predicted to fall, while a rise is in store for the GfK December consumer confidence posting.
Overall, this is expected to see the Euro repeat last week’s movement – mixed overall with occasional EUR GBP gains.
Recent Interbank Exchange Rates
At the time of writing, the Pound Euro (GBP EUR) exchange rate was trending in the region of 1.16 and the Euro Pound (GBP EUR) exchange rate was trending in the region of 0.85.