- GBP EUR Slides on ‘Brexit’ Jitters – Market fears drag on Pound.
- UK GDP Rises – However growth not sufficient enough to calm investor uncertainty.
- Europe Political Mummers Weigh on Euro – Markets fear rise of populist parties.
The GBP EUR exchange rate struggled to stabilise at the end of last week’s session, causing the Pound’s (GBP) gains for the week to be limited.
Pound Euro (GBP EUR) Slides Over ‘Brexit’ Uncertainty
The Pound Euro (GBP EUR) exchange rate tumbled late last week as persistent concerns around ‘Brexit’ caused Sterling to fluctuate.
The Pound rose initially on Monday after Prime Minister Theresa May hinted that the UK government may seek a transitional deal in ‘Brexit’, which would guarantee British Businesses access to the single market for a set period after ‘Brexit’, giving the government time to negotiate a new trade deal.
After sliding back to levels close to where it opened for the week the Pound received a second windfall on Wednesday when Chancellor Philip Hammond unveiled his first Autumn Statement.
Markets were willing to overlook a predicted £122billion ‘black hole’ in public finances over the next five years as the Chancellor announced plans to spend an additional £22billion on infrastructure projects over the same period in an effort to boost the UK’s appeal for foreign investors after ‘Brexit’.
British GDP Growth Not Enough to stave off ‘Brexit’ Fears
Sterling made one final attempt to rebuff the Euro’s (EUR) advances on Friday morning thanks to the latest GDP rising from 2.1% to 2.3%, as Darren Morgan, head of GDP at the ONS said;
‘Investment by businesses held up well in the immediate aftermath of the EU referendum, though its likely most of those investment decisions were taken before polling day. That, coupled with growing consumer spending fuelled by rising household income, and a strong performance in the dominant service industries, kept the economy expanding broadly in line with its historic average.’
However pressure over comments from Malta’s Prime Minster Joseph Muscat eventually caused the GBP EUR exchange rate to fall by around a cent as he warned that Britain would not be able access to the single market without accepting freedom of movement.
Euro Pressured by Fears of Political Upsets
The Euro (EUR) was unable to take much advantage of the Pound’s woes however as it suffered from its own political uncertainty.
Italian Prime Minister Matteo Renzi has vowed to resign if his constitution referendum fails to pass next month causing markets to fear that his government could be replaced by one of its more Eurosceptic rivals, such as the Five Star Movement.
This has added to concerns that Marine Len Pen leader of the National Front could potentially ride the recent wave of populism in Europe, to win the French elections next year, which could lead to the break-up of the European Union should she manage to follow Britain’s example and lead France out of the EU.
GBP EUR Exchange Rate Forecast: German Retail Sales may Strengthen Euro
The GBP EUR exchange rate may slide this morning if Germany’s retail sales report impresses as a notable rise over the 0.4% recorded in September is likely to provide some lift for the Euro.
Meanwhile UK markets will be hoping for a rise in British property values as Nationwide releases its latest report on House Prices, with an improvement over 4.6% likely to prevent the Pound from slipping further.
Markets will also look towards Mario Draghi’s speech in European Parliament this afternoon as they hope that the European Central Bank President will make some indication on whether the ECB plans to extend its quantitative easing programme past March 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.