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GBP EUR Exchange Rate Recovers Slightly from French Election-Inspired Lows

  • GBP EUR Exchange Rate Near to 1.18 – But remains in 1.17 lows
  • European Markets Cheer Macron’s Poll Lead – Hopes high for a Macron win in election
  • UK Borrowing Mixed – Euro holds its ground on Tuesday
  • Forecast: European Central Bank Meets Thursday – Will bank be optimistic on Eurozone?

GBP EUR Exchange Rate Recovers Slightly on Wednesday

Amid a lack of influential data, the GBP EUR exchange rate recovered from its worst levels during Wednesday’s European session. GBP EUR even tested levels above 1.18 later in the day.

Investors sold the Euro from its highs in profit-taking and due to persistent concerns about the possibility that anti-EU Marine Le Pen could win the French Presidential election.

Thursday’s session will be a lot more influential for the GBP EUR exchange rate, as the European Central Bank (ECB) will hold its April meeting and Germany’s April inflation projections will be published.

If the ECB takes a hawkish tone, the Euro will see even stronger demand later in the week and could push GBP EUR back down to its lows.

[Previously updated 12:56 BST 26/04/2017]

Demand for the GBP EUR exchange rate improved slightly during Wednesday’s European session.

Some investors sold the Euro from its highs after its strong performance on Monday and Tuesday, but a lack of fresh UK news limited the Pound’s recovery.

Wednesday was quiet in general in terms of relevant data. Business confidence in the Netherlands improved from 7.8 to 8.3 in April, but this had no effect on Euro trade.

[Previously updated 16:35 BST 25/04/2017]

GBP EUR Exchange Rates Flat on Tuesday

Due to slightly concerning UK data and lasting optimism towards the second round of the French Presidential elections, the GBP EUR exchange rate was largely flat during Tuesday’s European session.

Analysts had forecast the March UK public sector net borrowing result would come in at about £-1.5b, but the figure instead came in at a much lower £-4.36b.

While this report rounded off the financial year with the lowest government borrowing since the financial crisis, analysts expect this drop in borrowing is temporary.

Most forecasters expect borrowing to worsen again in the next year. Factors like rising inflation and rising healthcare costs are predicted to put pressure on public finances.

Wednesday is unlikely to see any shifts in GBP EUR exchange rate movement due to a lack of influential UK or Eurozone data due for publication until Thursday.

[Previously updated 12:47 BST 25/04/2017]

Demand for the GBP EUR exchange rate was little changed on Tuesday. The day’s UK data was mixed and as a result didn’t shift the Pound’s movement in any notable way.

Britain’s public sector net borrowing data from March showed that the UK government borrowed far more than expected throughout the month.

However, the report also confirmed that overall, UK government borrowing in the 2016/17 fiscal year was the lowest it had been since the financial crisis.

[Published 06:00 BST 25/04/2017]

The GBP EUR exchange rate saw significant losses when markets opened this week as investors reacted to the first round of the French Presidential elections. A lead for pro-EU centrist Emmanuel Macron in the first round bolstered hopes he would win the second round on the 7th of May.

GBP EUR surged to above 1.19 last week and opened this week at that level. However, the moment Asian markets opened on Monday morning GBP EUR plummeted to 1.17 due to a surge in Euro demand. GBP EUR spent most of Monday’s European session trending between 1.17 and 1.18.

Pound (GBP) Slows as UK 2017 Outlook Becomes Murky

While investors are more optimistic on the Pound overall following last week’s surprise UK general election news, recent UK data has continued indicating that Britain’s economy may not be in for a smooth year.

Friday saw the publication of Britain’s March retail sales results, which came in well below expectations. Month-on-month retail sales dropped from 1.7% to -1.8%, while yearly retail sales slowed from 3.7% to 1.7%.

This increased concerns that British consumers were holding back on spending due to rising inflation and slowing wage growth. Consumer-facing businesses make up a large chunk of Britain’s Gross Domestic Product (GDP), so this is worrying news for national economic growth.

Britain’s economic outlook became even more uncertain on Monday, when CBI published its latest business optimism index. CBI’s Q2 optimism index plunged from 15 to 1, indicating there may be rough waters ahead.

For now however, UK manufactured goods are in demand according to CBI’s industrial trends survey.

Euro (EUR) Surges on Hopes for Macron French Election Win

Sunday saw France take to the polls for the first round of the 2017 French Presidential election. In what was almost a surprising relief to investors and analysts, the results came in pretty close to the figures projected by opinion polls in recent weeks.

Pro-EU centrist Emmanuel Macron led the bunch with 23.8% of the vote and anti-EU far-right Marine Le Pen followed with 21.5%.

Those two will go head-to-head in the second round on the 7th of May. The other two major candidates, pro-EU conservative François Fillon and anti-EU hard-left Jean-Luc Mélenchon, both got around 19% of the vote.

After last year’s surprising Brexit and Trump votes, investors were relieved by the accurateness of the polls. The defeat of the anti-EU Mélenchon, as well as opinion polls indicating a clean second round win for Macron, were the main reasons behind the Euro’s surge on Monday.

While a Le Pen victory in the second round remains a possibility, more investors now expect Macron to win in the second round. This also has optimistic long-term implications for the Eurozone, according to Valentijn van Nieuwenhuijzen from at NN Investment Partners;

‘First, it would substantially reduce the risk that the increasingly strong and broad-based recovery in the European economy is derailed by a political shock.

Second, the prospect of stronger rather than weaker cooperation between France and Germany would emerge at the core of Europe, making the region more able to digest new political, institutional and economic challenges in the future.’

As a result, the Euro outlook has improved and the currency has the potential to rise even further.

GBP EUR Exchange Rate Forecast: UK Borrowing Stats Ahead

Some investors may sell the Euro from its Monday highs or decide the possibility of an anti-EU Le Pen win is still too high to warrant buying the shared currency. Other than that, the Euro is likely to hold most of its Monday gains even if UK data impresses.

Tuesday’s UK data includes March’s public sector net borrowing results. Analysts project the government will have borrowed around £1.5b throughout the month, deepening the deficit.

If the public borrowing stat is even worse than expected, the Pound could weaken further on continued concerns about Britain’s economic outlook. However, a better-than-expected borrowing result could see GBP EUR recover slightly and potentially hold above the level of 1.18.

The Pound to Euro exchange rate is more likely to see its next big move on Thursday, when the European Central Bank (ECB) will hold its April policy decision.

Though the bank is likely to avoid making any kind of political projections, any indication that Macron’s good polling performance could have a supportive effect on the Eurozone economy could push the GBP EUR exchange rate down further later in the week.