- Pound Euro 2016 Struggles to Hold 1.19 Level – GBP sold from highs in profit taking
- European Central Bank Jitters Keep Euro Weak – Investors expect stimulus extension
- Final November Eurozone PMIs Mixed – Fail to dent Euro movement
- GBP Forecast: Supreme Court Appeal Ongoing – Four day challenge continues Wednesday
Pound Euro 2016 Exchange Rate Edges Higher on Tuesday
The Pound Euro 2016 exchange rate’s movement was a lot narrower on Tuesday after Monday’s plunge, as Sterling lacked the momentum for a full recovery while the Euro slipped from its highs.
Demand for the Euro was also weakened on Tuesday afternoon by comments from Italy’s Interior Minister, Angelino Alfano. Alfano indicated that Italy may see an election as soon as February 2017 after Renzi’s resignation and these comments caused concern among traders.
However, UK markets saw their own jitters as the Supreme Court challenge from the UK government continued. Traders are concerned that the arguments from High Court advocates over the coming days will not impress Supreme Court Judges.
(Previously updated 16:51 GMT 05/12/2016)
Pound Euro 2016 Exchange Rate Sold from Highs as Markets Digest Eurozone News
The Pound Euro 2016 exchange rate fell from its highs on Monday after very briefly reaching above the key 1.20 level, as traders returned to the Euro following weeks of bearishness. By the end of Monday’s European session, GBP EUR was trending below 1.19 once again.
While Monday’s Eurozone ecostats were mixed, traders brushed over them throughout the day instead opting to focus on what has kept the Euro weak for weeks – Italian referendum jitters.
The highly anticipated Italian constitutional referendum was held on Sunday and as pollsters and analysts predicted, it was a decisive win for the ‘No’ vote. As expected, Italian Prime Minister Matteo Renzi promptly announced that he would be resigning.
However, while the Euro briefly plunged on the news its movement quickly reversed. Analysts claimed that a win for ‘No’ had already been priced in, limiting the Euro’s further losses.
Political commentary throughout the day seemed to indicate that a snap general election in Italy was actually unlikely despite Renzi’s resignation.
Austria’s presidential election re-run ended with a sure loss for far-right candidate Norbert Hofer, which also sent relief through Eurozone markets throughout the day and to some traders was seen as hope that populist nationalism would not spread throughout the Eurozone as far as feared.
The Euro’s recovery is likely to be limited in the coming days as the European Central Bank’s (ECB) Thursday meeting approaches, and investors are still wary about rising populism in the Euro bloc, but for now the shared currency enjoyed a moment of reprieve.
(Published 07:00 GMT 05/12/2016)
The Pound Euro 2016 exchange rate edged higher last week as a new load of soft Brexit hopes bolstered the Pound while the Euro was held back by populism concerns and European Central Bank (ECB) jitters.
GBP EUR gained over half a cent throughout the week, beginning above 1.17 but ending the week comfortably above the key level of 1.18 for the first time since September. It struggled to hold a three-month-high of 1.19.
Pound (GBP) Boosted by Soft Brexit Hopes and Supportive UK Data
Sterling trade was heavily volatile last week and the British currency often surged and plummeted in quick succession as the currency tested key resistance levels against its major rivals for the first time in two months.
Underlying factors in GBP trade were generally optimistic which made it easy for the British currency to hold its ground against the Euro after the brief profit-taking selloff seen at the beginning of the week.
The main event for the Pound came later in the week, when influential figures made optimistic comments about the UK’s continued membership of the European Union’s single market even after the Brexit.
Eurogroup President Jeroen Dijsselbloem indicated on Thursday that the EU may find a way to allow the UK to remain in the internal market but clarified that it would not get a better deal than full EU member states. He stated;
‘Of course, we can design new agreements to allow them to enter the internal market and to allow trade to continue. We have to do that. But it will not be as easy or as cheap as it is now.
The economic reality will be that, if you are not fully part of an internal market, then you will have extra costs to do business.’
Despite the warning tone, this was one of the first indications in a while that officials over the channel were willing to help the UK find a post-Brexit trade deal.
UK Brexit Secretary David Davis also bolstered GBP demand towards the end of the week by hinting that the government may be willing to pay for single market access after the Brexit.
As GBP hit key resistance levels it was sold from its highs on profit-taking, but the currency saw solid gains last week overall.
Euro (EUR) Strength Limited on Political and Central Bank Jitters
The Eurozone saw a slew of generally positive economic data published last week, but this was not enough to improve demand for the Euro as traders were more concerned about mid to long-term downside factors.
This was despite October’s Eurozone unemployment rate unexpectedly falling to 9.8%, its best level since 2009.
Friday’s Eurozone producer prices also beat expectations, but as the weekend approached this was unable to bolster demand for the shared currency.
EUR traders have been generally bearish on the currency over the last week amid concerns that Eurozone political events could end in favour of populist, protectionist politics.
The wide expectation that the European Central Bank (ECB) could extend its aggressive stimulus measures in the coming week’s meeting also weighed on Euro demand considerably last week.
Pound Euro 2016 Forecast: Euro Extremely Vulnerable to Loss This Week
Traders will be spending most of Monday’s European session reacting to the results of the weekend’s Eurozone political events – namely the results of the Italian constitutional referendum and Austria’s presidential election re-run.
As a result, the Euro is unlikely to react strongly to the day’s typically influential Eurozone PMIs from Markit. The final November prints are expected to meet preliminary results.
The same could be said for October’s Eurozone retail sales results and Sentix’s December investor confidence figure.
Monday will see a vital event for GBP traders however. Britain’s Supreme Court will hear an appeal from the government over the legality of activating Article 50 and beginning the Brexit without a Parliamentary vote.
Investors widely hope for a Parliamentary vote on Article 50 as they perceive this to be the best chance to fight for access to the European Union’s single market during Brexit negotiations.
As a result, Pound Euro 2016 trade could be highly volatile on Monday with markets making broad movements on the currently politically-worn currencies.
Thursday will also be extremely important for EUR trade, as the European Central Bank (ECB) will hold its December policy meeting. This meeting is widely expected to be the time the bank will decide whether or not to extend its aggressive easing package.
The potential or rising populism in the Eurozone and the prospect of loose monetary policy for longer in the bloc mean the Euro’s downside chances are high this week. This could see the Pound Euro 2016 exchange rate advance unless hard Brexit fears worsen again.