- GBP EUR Exchange Rate Around 1.19 – Pound Euro rises on Monday
- Macron Wins French Election – Eurozone relief rally limited
- GBP Forecast: Bank of England Meets This Week – Investors hope for hawkish tone
- EUR Forecast: Eurozone Stability to Improve – Will ECB officials react to French election?
GBP EUR Firms on BoE Hopes, Dovish Draghi
The Pound to Euro exchange rate looked to end Wednesday’s trade session near the level of 1.19. However, GBP EUR could fall from its highs on Thursday if the Bank of England (BoE) disappoints.
Investors have been speculating that the BoE could take on a more hawkish tone due to strong UK inflation in recent months.
Wednesday also saw European Central Bank (ECB) President Mario Draghi hold a speech. In the speech, Draghi largely repeated familiar lines defending the bank’s aggressive stimulus package and warned that these would remain in place until Eurozone inflation could remain solid without it.
[Previously updated 12:33 BST 10/05/2017]
Sterling continued to climb against the Euro on Wednesday as the GBP EUR exchange rate trended above the level of 1.19 for the first time since late-April.
The lack of supportive UK data this week has done little to dissuade investors hungry for the Pound, while the Euro continues to be sold as investors cool from last weekend’s French election excitement.
Sterling is also benefitting from market anticipation for the Bank of England’s ‘Super Thursday’ this week.
[Previously updated 16:15 BST 09/05/2017]
GBP EUR Advances on BoE Hopes
Despite a lack of influential UK data published thus far this week, the GBP EUR exchange rate advanced on Tuesday.
The morning’s Eurozone data was unable to provide any notable support for the Euro, which continued to be sold from its weekend highs in profit-taking.
The Pound, on the other hand, benefitted from market hopes for this week’s upcoming Bank of England (BoE) meeting. Investors speculate that bank officials may take a more hawkish stance.
As Sterling has already seen gains from BoE anticipation, GBP EUR movement may be cooler on Wednesday.
[Previously updated 12:49 BST 09/05/2017]
After mixed movement for most of Monday’s European session, the GBP EUR exchange rate ended the day with firm gains and continued to edge higher on Tuesday. GBP EUR trended in the region of 1.18.
Despite solid data from the Eurozone on Tuesday, investors continued to sell the shared currency from its weekend highs in profit-taking.
Germany’s March trade surplus results improved, rising from €20b to €25.4b. February’s figure was revised higher from €19.9b.
However, on the other hand Italy’s latest retail sales results fell short of expectations, which weighed on Euro demand on Tuesday.
[Published 06:00 BST 09/05/2017]
Monday’s European session saw unexpectedly mixed movement in the Pound to Euro exchange rate as investors reacted to and digested the results of the 2017 French Presidential election. Pro-EU candidate Emmanuel Macron won the election with over 66% of the vote.
GBP EUR began the week at the level of 1.18 but despite Eurozone optimism, the pair spent most of Monday trending above the week’s opening levels. However, due to a lack of UK news until Thursday it’s possible GBP EUR will slide.
Pound (GBP) Remains Strong on UK Election Hopes
The Pound outlook has improved notably in recent weeks due to domestic political and economic news. Sterling investors are particularly looking forward to the UK general election in June, which is predicted to end with a strong result for UK Prime Minister Theresa May’s Conservative government.
Last week saw local government elections take place across Britain, which some analysts have called a litmus test for the general election next month.
In local elections, the Conservative government made massive gains. This made investors even more confident that the Conservative party will easily increase its Parliamentary majority in the general election on the 8th of June.
The Pound has also been bolstered by recent UK data. Markit’s April PMIs all comfortably beat expectations and rose despite analysts expecting the figures would have slipped since March.
Investors had been concerned in recent months that Britain’s economy would slow this year, due to rising inflation and slower wage growth putting off consumer spending and damaging the customer-facing services sector.
Euro (EUR) Movement Mixed as Macron Wins 2017 French Election
Sunday saw the French public take to the polls and vote for the nation’s next leader. Between pro-EU centrist candidate Emmanuel Macron and anti-EU far-right Marine Le Pen, Macron achieved a clean and decisive win with over 66% of the vote.
Some analysts had expected Eurozone assets to rally in reaction to the news while others argued a Macron victory had been largely priced in already due to the first round’s results and polling data from a televised debate last week.
Monday’s actual Euro movement was a bit of both. Earlier in the day, investors favoured Eurozone stocks and government bonds while the shared currency weakened, but later in the day the Euro strengthened again and other assets fizzled.
Investors were hesitant to make any big moves on Eurozone assets, as new challenges now faced the French economy and Macron’s first months as President.
Macron’s party, ‘En Marche!’, is still relatively new and as a result has no real power in French parliament. While the party is predicted to do well in the upcoming legislative elections, investors remain concerned.
Larry Hatheway, economist from GAM, also believes that European Central Bank (ECB) speculation is holding back Eurozone government bonds;
‘Any hints the ECB is contemplating a shift to a neutral bias could provide the impetus for the next rise in global bond yields, a narrowing of spreads between US and Eurozone bond yields, and a stronger Euro.’
GBP EUR Forecast: Bank of England Meets This Week
GBP EUR exchange rate volatility may calm down this week as investors digest the French Presidential election result.
2017’s remaining Eurozone election, in Germany, is unlikely to cause any major splashes in the currency bloc in comparison as Germany is highly likely to vote for a pro-EU candidate.
As a result, analysts expect Eurozone political jitters to fade and that the bloc will see strong economic performance throughout the year. The Pound to Euro outlook is lower in the long-term due to expectations for the Eurozone to perform well going forward.
If the European Central Bank (ECB) or any of its officials begin to hint at a more hawkish outlook due to recent economic or political news, the Pound to Euro exchange rate is even more likely to weaken.
However, the Pound has an opportunity to advance this week depending on the outcome of Thursday’s Bank of England (BoE) news.
The BoE will hold its May monetary policy decision on Thursday and publish its meeting minutes alongside its UK inflation report.
If the BoE makes any indication that strong UK data could pressure it into tightening UK monetary policy, the Pound to Euro exchange rate is likely to advance towards the end of the week.