- GBP EUR Pressured by ‘Brexit’ – Think-tank predicts split from EU will cause a ‘decade of disruption’ for Britain.
- UK House Prices Rise – Pound unable to stabilise at higher levels however.
- Political Uncertainty Pressures Euro – Investors fear the rise of populism in the Eurozone ahead of a number of elections in 2017.
The GBP EUR exchange rate continued to slide today after a British think-tank predicted that the UK will face a ‘decade of disruption’ following its decision to leave the EU.
Pound Euro (GBP EUR) Pressured by Disruption Forecasts
The Pound Euro (GBP EUR) exchange rate slid today following the release of a report from the Institute for Public Policy Research (IPPR) a centre-left think-tank based in London that warns of a ‘decade of disruption’ in the wake of ‘Brexit’.
The report says that the ‘profound shock’ to the UK’s political and economic outlook comes at a time when Britain faces the challenge of an aging population, with the additional strain of pensions and other social care for the elderly likely to reach over £13bn by around 2030.
The IPPR also adds that accelerated improvement in technology in recent years could also lead to further automation over the next decade, threatening a significant number of jobs, particularly in manufacturing. As the report explained;
‘Even as what we do and how we work changes, the UK is likely to remain trapped in a low growth, low interest rate decade driven by demographic shifts, productivity trends, weak investment, weak labour power, high levels of debt, and the headwinds of a slowing global economy.’
Rise in House Prices Provides Sterling with Brief Respite
Sterling did receive a slight boost early this morning following the release of Nationwide’s latest UK House Price data, which saw a surprise rise in prices from 4.4% to 4.5% in December, after predictions that it would fall to 3.8%.
However it proved to be a dead cat bounce for the Pound as analysts remained downbeat about the UK housing market’s prospects next year. As Howard Archer, chief economist at IHS Markit explained;
‘The fact that the housing market is seemingly struggling to build momentum after coming modestly off its August lows reinforces our suspicion that it is likely to find life increasingly difficult as 2017 progresses.’
Political Uncertainty Weighs on Euro
The Euro gains have been muted somewhat by growing concerns over the impact of populism in Europe and whether it could cause a Donald Trump level upset in various major elections across the Eurozone next year.
There is rising uncertainty towards both the Dutch and French elections in the first half of the year where far-right parties appear to have been gaining steady support in the polls, threatening to disrupt the political norm.
Both Holland’s Freedom Party and France’s National Front desire to hold referendums on leaving the EU, which could potentially cause the collapse of the whole Eurozone project if they are successful.
GBP EUR Exchange Rate Forecast: Lull in Data to Magnify ‘Brexit’ Impact
The GBP EUR exchange rate is likely to struggle to move for the remainder of the week’s session as both markets lack data over the holiday period.
This is likely to cause any momentum in the exchange rate to be driven by ‘Brexit’ or the political landscape in the EU as traders attempt to gauge what impact these will have on both the Pound and the Euro in 2017.
Current Interbank Exchange Rates
At the time of writing the GBP/EUR exchange rate was trending around 1.17 and the EUR/GBP exchange rate was trending around 0.85.