- GBP EUR Rises on UK-US Trade Prospects – Trump win may allow for trade agreement post-‘Brexit’.
- Euro Pressured by Trump Win – Strong US Dollar and fears of a similar populist movement in Europe weighs on the Euro.
- Pound May be Bolstered by Domestic Data – UK CPI report due Tuesday.
The GBP EUR exchange rate has skyrocketed to a new monthly high, following the shock victory of Donald Trump in the 2016 presidential elections, rising by nearly six cents from lows on Wednesday morning.
Pound Euro (GBP EUR) Advances with Markets Upbeat on Trade Deal Prospects
The Pound Euro (GBP EUR) exchange rate has continued climbing since Trump’s victory on Wednesday, with markets speculating on the possibility of the UK forming a new trade agreement with the US post-‘Brexit’.
Investors are basing this speculation on comments made by Trump in run up to the EU referendum in which he sided in favour of ‘Brexit’, saying that Britain would be at the ‘front of the queue’ for forming a trade agreement with the US once it had left the EU.
However some analysts have warned that a deal could still be a long way off as one of Trump’s key campaign themes was his fierce criticism of free trade agreements – which he blames for the decline of US jobs in the industrial sector.
Euro (EUR) Pressured by Trump Effect
The Pound also advanced against the Euro, which was weakened by unexpected gains in the US Dollar (USD) after Trump became the President elect.
As the other half of USD EUR, the most traded currency pairing in the world, the single currency felt the weight of the surprising strong ‘Greenback’ following Trump’s victory speech as markets reacted positivity to his more reserved and ‘presidential’ tone.
The Euro has also been pressured by investor fears that the populist victories of Trump and ‘Brexit’ may begin a global trend that could spread to Europe and greatly upset the current status quo.
There are increasing worries that the victories of both ‘Brexit’ and Donald Trump have begun an anti-establishment movement that could cause more extreme parties and policies to gain traction with voters in Europe, with Marine Le Pen, the leader of France’s far-right Front National party proclaiming ‘today, the United States, tomorrow, France’ as she congratulated Trump on his win on Wednesday.
GBP EUR Exchange Rate May Continue to Rise as Trump Win Buoys Pound
The GBP EUR exchange could potentially rise further next week should market sentiment towards Trump remain high. However there may be some volatility in the currency pairing as the dust settles and investors begin to focus on Trump’s plans for his first term in office.
Should investors manage to focus on something other than the US election result next week then data from both markets may also provide some catalyst for movement.
The UK will release its latest consumer price index on Tuesday, which could provide a notable boost for the Pound should it perform was well as in September when it surged from 0.6% to 1.0%, although current forecasts peg a far more modest rise to 1.1% in October.
Meanwhile the Eurozone will also release some major data next Tuesday with both the German ZEW economic sentiment survey and Eurozone GDP reports due. An expected rise in the ZEW survey from 6.2 to 9.2 could help EUR GBP recover some of its recent losses, especially if growth in the Eurozone exceeds expectations as it may help to alleviate fears that the European Central Bank may seek to extend its monetary easing programme past 2016.
Current Interbank Exchange Rates
At the time of writing the GBP/EUR exchange rate was trending around 1.15 and the EUR/GBP exchange rate was trending around 0.86.