Homepage » Brexit » Pound Euro Exchange Rate Forecast: GBP Could Continue to Fall on Scottish Referendum Fears

Pound Euro Exchange Rate Forecast: GBP Could Continue to Fall on Scottish Referendum Fears

  • Pound Euro Exchange Rate Forecast to Fluctuate – Supreme Court decision causes new questions
  • ECB’s Draghi Disappoints Euro Investors – Hopes of Eurozone inflation spike fade
  • GBP Update: Supreme Court Upholds High Court Decision – But Scottish ministers ignored
  • EUR Forecast: Trump’s First Week could Hit EUR – Inflation fears may drag on shared currency demand

Pound Euro Exchange Rate Forecast Lower After Supreme Court Judgement

This Pound Euro exchange rate forecast improved slightly on Tuesday afternoon and GBP EUR trended a little more flatly, returning to above 1.16.

News that the UK government could publish a Brexit plan within days to assist MPs with the incoming Article 50 vote in Parliament bolstered GBP excitement slightly, despite persisting worries that Scotland would hold another independence referendum.

Demand for the Euro also weakened slightly on Tuesday afternoon as demand for the US Dollar improved. The morning’s Eurozone PMI results had not done enough to give the Euro strong lasting momentum throughout the day.

[Previously updated 12:35 GMT 24/01/2017]

Despite the UK Supreme Court upholding last year’s High Court decision that Article 50 must be activated through Parliament, the Pound failed to benefit on Tuesday morning and was instead sold against rivals like the Euro.

The Pound Euro exchange rate forecast was undermined after the Supreme Court ruled that Wales, Scotland and Northern Ireland governments did not need a say on the Article 50 vote.

Scottish ministers were quickly opposed to this decision and markets fear Scotland First Minister Nicola Sturgeon will use this to fuel a second Scottish independence referendum.

With the UK economy already under threat from the Brexit process itself, the thought of Scotland pulling out of the Pound in order to remain in the EU single market has put a new underlying downside in GBP trade.

[Previously updated 16:42 GMT 24/01/2017]

Pound Euro Exchange Rate Forecast to Advance Following Supreme Court Decision

By Monday afternoon GBP EUR trended above the key level of 1.16. The Pound Euro exchange rate forecast is even higher for Tuesday with most analysts expecting the UK Supreme Court to uphold the High Court’s judgement and rule that Article 50 must be activated through Parliament.

Tuesday will also see the publication of key domestic data, including Britain’s December public sector borrowing results.

The Euro, on the other hand, is likely to react to Markit’s preliminary January Eurozone PMIs. Analysts expect the Eurozone bloc will have seen another month of solid economic activity, so GBP EUR could surge if PMIs come in below expectations.

[Previously updated 14:18 GMT 23/01/2017]

Monday morning saw little change in the coming week’s Pound Euro exchange rate forecast, as GBP EUR benefitted from Supreme Court decision anticipation.

Both the Pound and Euro were also strengthened by a US Dollar selloff on Monday, as traders reacted to US President Donald Trump’s first weekend in power.

US jitters worsened after Trump’s protectionist rhetoric appeared to re-emerge and his administration focused on a row with the media rather than on things like fiscal policy.

Trump’s first week in office could be crucial in setting the tone for his Presidency – and any unexpected moves on his part could result in significant currency market movement.

[Previously updated 11:10 GMT 23/01/2017]

This week sees the Pound Euro exchange rate forecast to the upside, as markets await the anticipated judgement on the activation of Article 50 from the UK Supreme Court. This will also be the first week of the US Trump administration, which may influence how the Euro is performing.

GBP EUR managed to end trading on a bit of a high last week, jumping from 1.14 to 1.15. The pair briefly hit 1.16 in the middle of the week and could return to that level in the near future if it’s decided that Government will need the ratification of Parliament before it can activate Article 50.

Upbeat UK data could also give Sterling a bit of a boost, particularly if dovish ECB rhetoric continues holding the Euro back. Of the week’s British ecostats, the most influential include public finance figures and quarter four GDP.

For Euro investors, ECB chief Mario Draghi’s speech in Torino, Italy, will be of interest. According to currency analyst Josh Ferry Woodard; ‘The Euro could fluctuate if the ECB Chief gives out any new clues about policy direction, however, having recently left rates on hold the ECB is not expected to give away any radical information at this juncture.’

Pound (GBP) Held Back from Brexit Optimism by Economic Concerns

Last week saw the Pound put in one of its best single-day performances in years. The British currency soared after a Brexit speech from UK Prime Minister Theresa May that put a focus on UK making strong new trade deals.

Among the comments that impressed markets most was a reconfirmation that the final Brexit deal would be voted on by Parliament.

May also instilled confidence by suggesting the UK would be a tough negotiator that would sooner take no UK-EU trade deal than one that was bad for Britain.

Later in the week May gave another speech, this time at the World Economic Forum (WEF) in Davos. She warned world leaders and businesses to make globalisation work for citizens and claimed the UK would become a global nation with competitive trade following the Brexit.

However, demand for the currency was limited slightly on Friday by a shocking drop in UK retail sales in December. Analysts expected November’s strong retail sales would be followed up in December by year-on-year sales growth of 7.2%. Instead, the yearly retail sales figure slipped from 5.7% to 4.3%.

This was due to monthly retail sales plunging by -1.9% as Sterling’s drop in value began to hit consumers’ pockets.

Euro (EUR) Limper after European Central Bank (ECB) Dovish Press Conference

Demand for the Euro slipped last week, as the first European Central Bank (ECB) meeting and press conference of the year did little to bolster market confidence in the short to mid-term performance of the Eurozone economy.

Markets had been hoping for a more optimistic tone from ECB policymakers due to increased Eurozone inflation in recent months, but when Draghi spoke at last week’s press conference his tone was far more dovish than expected.

Draghi stated that underlying inflationary pressures were still subdued. He indicated that rates would remain frozen for some time due to a significant amount of downside risks in the Eurozone economy that remained.

The ECB Twitter summed up some of the key quotes from Draghi;

‘Risks to Euro area growth outlook tilted to downside due to global factors. No signs yet of convincing upward trend in underlying inflation.’

However, Draghi also started that the risk of deflation had largely disappeared and remained confident that the ECB’s monetary policies were largely the reason for the Eurozone’s gradual recovery.

As a result, the Euro’s losses were narrow and it was able to perform better against the Pound on Friday.

Pound Euro Exchange Rate Forecast: Supreme Court Judgement Could Cause Sterling Surge

The coming week will be another important one for GBP trade, as Tuesday the 24th will see the UK Supreme Court finally make its judgement on whether or not to uphold the High Court’s ruling on Article 50.

The High Court had previously ruled that the motion to trigger Article 50 must be approved through a Parliamentary vote.

If this ruling is upheld by the Supreme Court, the Pound could surge on increased hopes that Parliament will vote to make single market access a part of Brexit negotiations.

While both EU leaders and the UK government have stated keeping full single market access while having increased border controls would not be possible, the possibility of fighting for single market access is still likely to bolster Sterling demand.

Tuesday will also see the publication of UK data, including public sector borrowing figures from December. Later in the week, Britain’s Q4 Gross Domestic Product (GDP) results may also influence Pound movement.

As for the Euro, the first steps Donald Trump takes as US President in the coming week are likely to influence the shared currency somewhat, particularly if they influence the global inflation outlook.

In terms of data, Markit will publish its preliminary Eurozone PMIs for January on Tuesday and the IFO will publish its German business sentiment surveys on Wednesday.

There’s plenty of potential for advancement in this week’s Pound Euro exchange rate forecast, particularly if the Supreme Court upholds the High Court ruling as expected.