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Brexit Jitters Keep Pound Euro Exchange Rate Sliding on Tuesday

Towards the end of Tuesday’s European session the Pound to Euro exchange rate continued to slip and briefly hit a new weekly low of 1.16.

The pair is likely to be influenced by Britain’s February manufacturing PMI from Markit on Wednesday. Any trade news or economic plans from Wednesday evening’s US President Trump speech is also likely to influence forex markets.

For example, a stronger US Dollar is likely to lead to a weaker Euro which could allow Sterling to recover.

The day’s German data will also be highly influential. Germany’s February employment stats and Consumer Price Index (CPI) estimates will be published throughout the day.

[Previously updated 12:31 GMT 28/02/2017]

Tuesday’s session saw the Pound to Euro exchange rate remaining near the lows seen on Monday, as jitters about the Brexit process beginning next month left demand for the Pound limp.

While the Euro’s advances slowed on Tuesday and the Pound’s selloff softened, GBP EUR still edged lower on Tuesday due to solid Eurozone ecostats.

France’s preliminary Q4 Gross Domestic Product (GDP) results largely met expectations, as did France’s February Consumer Price Index (CPI) figures.

[Previously updated 15:39 GMT 28/02/2017]

GBP EUR lost over half a cent in value during Monday’s European session but could recover on Tuesday if the day’s Eurozone ecostats fail to impress.

France’s preliminary Q4 Gross Domestic Product (GDP) results will be published on Tuesday morning. Better than expected growth in France could add to hopes that the Eurozone as a whole will also see solid growth in 2017.

GfK will also publish its February UK consumer confidence survey on Tuesday.

However, if Brexit concerns and Scottish independence fears persist, GBP EUR may struggle to advance even if UK data is solid and Eurozone data is poor.

Any signs that anti-EU Marine Le Pen is gaining on her frontrunner opponent, Emmanuel Macron, in French election polls could see the Euro shed its Monday gains however.

[Previously updated 12:42 GMT 27/02/2017]

The Pound to Euro exchange rate lost most of last week’s gains on Monday morning as Brexit concerns returned to the forefront of Sterling trade. GBP EUR trended at around 1.17.

With March beginning this week that meant the Brexit process would be beginning proper within a month. The reality that Britain will be withdrawing from the EU and likely losing most of the bloc’s trade benefits is likely to leave the British currency jittery this month.

Rumours also resurfaced that Scotland would soon be announcing a second Scottish independence referendum.

The possibility that Scotland could withdraw from Britain and leave the Pound has been seen as a significant destabilising factor in the British currency.

[Published 06:00 GMT 27/02/2017]

After advancing from 1.16 to 1.18, the Pound Euro exchange rate struggled to hold near its best levels. What can we expect from the currency pair in the week ahead?

Eurozone political fears are likely to continue weighing on Euro demand throughout the week. Many analysts are suggesting that the shared currency could see extended pressure until after the 2017 French election is over.

If anti-EU Presidential candidate Marine Le Pen wins the election, she is likely to withdraw the second biggest Eurozone economy from the currency bloc completely.

While analysts have suggested the partnership between Francois Bayou and Emmanuel Macron could help Macron win the second round of the election in May, the possibility of a surprise Le Pen win similar to the surprise Brexit and Trump wins in 2016 is a significant weight on EUR.

As a result, the Euro may struggle to see a huge benefit from the upcoming data, even if it beats expectations.

The most influential Eurozone data due for publication this week is German and Eurozone employment results and the latest inflation figures.

February’s final Eurozone PMIs will also be published throughout the week. If all these key reports beat expectations, they may help give the Euro the momentum it needs to emerge from its recent lows.

Some analysts have seen the Euro as being considerably undervalued in recent weeks. The Euro is often correlated to the strength of the US Dollar, and Mark Haefele from UBS Wealth Management believes this indicates just how undervalued the Euro is;

‘At 1.06 versus the US Dollar, the Euro is undervalued. Our estimate for the purchasing power parity of EUR-USD is 1.24. The magnitude of the Euro’s undervaluation suggests that markets are underestimating the sustainability of the Eurozone’s recovery.’

Analysts also suggest the Euro’s downsides are likely to be limited in the coming weeks despite political uncertainty.

This could help the Euro recover against the Pound.

The biggest news for GBP traders in the coming week is Britain’s February PMIs from Markit. Manufacturing stats will come out on Wednesday, followed by construction on Thursday and finally services and composite prints on Friday.

These PMIs will give traders a clearer picture of how much rising inflation has affected UK growth in February.

Other UK data due for publication throughout the week includes GfK’s February consumer confidence results, as well as January’s Bank of England (BoE) consumer credit print.

Last week saw the Pound to Euro exchange rate advance by over a cent and trend comfortably above the key level of 1.18 for the longest period since December.

This was largely because of Eurozone political concerns, but the week’s UK data was also able to impress traders.

Not only did the UK public borrowing figure come in with its biggest surplus in 17 years, CBI’s February retail print unexpectedly improved to 9.

This left investors speculating that Britain’s retail sector may not be as unhealthy in 2017 as feared. GBP EUR was also strengthened by Britain’s 2017 inflation outlook last week.

Analysts from Citi bank argued that high public inflation expectations as well as the chance that inflation could affect more than just consumer spending could pressure the Bank of England (BoE) into tightening UK monetary policy despite Brexit uncertainty.

Although other analysts are still warning that the outlook for Britain’s retail sales sector remains gloomy, the Pound to Euro exchange rate is unlikely to fall far in the coming week even if UK data disappoints and Eurozone data impresses due to persistent Eurozone political concerns.