- Pound Sterling Euro 2016 Breaks 1.16 – Can GBP EUR hold this monthly high?
- Will Trump Administration Create UK Trade Deal? – Investors hopeful for UK-US relations
- GBP Forecast: Sturdiness Could Continue – Pound finds higher support levels
- EUR Forecast: ECB Concerns and Strong USD to Weigh – But protectionist Trump could harm USD
Pound Sterling Euro 2016 Exchange Rate Nears 1.16
Friday’s session was yet another bullish one for the Pound as UK-US trade deal hopes kept Sterling trade buoyed throughout the day. While the Pound Sterling Euro 2016 exchange rate struggled to hold its best levels towards the end of the week’s European session, the pair fluctuated near the key level of 1.16 for the first time since mid-September.
The Euro struggled, making it easier for Sterling to hold its ground. Traders became jittery on the shared currency due to speculation that following the Brexit and Trump votes this year, nationalistic populism could also rise in the Eurozone.
The possibility of a nation leaving the Eurozone bloc has been perceived as one of the biggest threats to the Euro project. As a result, the Euro performed bearishly as the week’s European session drew to an end.
(Previously updated 08:40 GMT 11/11/2016)
The Pound Sterling Euro 2016 exchange rate continued to advance throughout Thursday’s trade as investors settled for a Pound rally on hopes of stronger UK-US trade relations during the upcoming Trump administration.
GBP EUR is now over two cents above the week’s worst levels of 1.10 and has successfully held above the week’s opening levels of 1.12. At its current trajectory, GBP EUR could hold above a monthly high of 1.15 until the end of the week.
Pound (GBP) Bolstered by Lack of Downside Risks and Post-Brexit Trade Hopes
Sterling has experienced months of pressure and plunges amid market concerns that Britain would lose access to the European Union’s single market since the UK voted to Brexit back in June 2016.
Global markets have been in long-term panic mode over the uncertainty of Britain’s trade future. This has been among the main reasons for Sterling’s huge drop in value in the last half a year and has seen the Pound Sterling Euro 2016 exchange rate hit low values not seen since 2009.
As a result, any hopes of stronger trade ties for the United Kingdom have cheered up gloomy British markets and given traders hopes that a post-Brexit Britain would not lose all the benefits of EU-member Britain.
Because of this, news that US President-to-be Donald Trump’s trade adviser Dan DiMicco had indicated that Britain would be at the front of the queue for a Trump administration trade deal lit a fire under Pound trade on Wednesday night. This strong trade continued throughout Thursday.
DiMicco stated to the BBC that Trump wanted to overhaul current global free trade systems and that Britain’s reasons for leaving the EU were ones Trump agreed with. He said on the potential of UK-US trade;
‘First off they are our friends, they have always supported us, and we’ve worked together, and they are leaving the EU in our estimation for the right reasons.
They have lost control of their economy, the job creation engine, so why shouldn’t we be working with like-minded people before we do a deal with anybody else?’
Euro (EUR) Weakened by European Central Bank (ECB) Stimulus Speculation
As is the norm when global markets experience sudden sharp bouts of volatility, the European Central Bank (ECB) was quick to announce that it was prepared to do whatever it took to keep the Eurozone economy braced for shock.
When the Brexit vote shocked markets earlier this year, the ECB took a similar tone which weighed on Euro demand. Despite the effect the referendum had had on the Pound, the market effect on the Eurozone has thus far not caused the ECB to take action.
However, with ECB policy already ultra-loose and active speculation that the bank will announce an extension to its current monetary policies as soon as December, investors perceived too many downside risks in Euro trade.
The Euro’s appeal has also been weighed down by the market’s unexpected appetite for the US Dollar over the last day.
Trump’s protectionist rhetoric on the campaign trail had concerned investors in the moments following the election, causing the ‘Greenback’ to plunge while the Euro benefitted from negative correlation.
However, his acceptance speech on Wednesday was ‘Presidential’ enough for some investors and analysts to hope for a more pragmatic President than campaign. This left USD trending more strongly on Thursday, while EUR slumped.
Pound Sterling Euro 2016 Exchange Rate Forecast: Trump Rhetoric Could Still Affect GBP EUR
While markets cooled considerably quicker than forecast following Trump’s win, this has largely been due to the next President’s unexpectedly calm and ‘Presidential’ demeanour in his acceptance speech.
A day on and neither Trump nor his advisors had made mentioned some of the campaign’s more controversial or protectionist policy proposals, allowing an air of cautious optimism in markets.
However, uncertainty still grips the world’s traders. Investors are on edge awaiting any indication from Trump about whether these policies are still on the to-do list for the Trump administration.
As a result, with the Pound and Euro both sensitive to US trade news this week, exchange rate movement could still be directly influenced by new comments from the Trump team. EU leaders have also asked for more clarity from the President-to-be.
Regardless, as markets continue to cool over the next day, GBP EUR correlation to US market news will begin to die down. This means that if Friday’s final October German Consumer Price Index (CPI) scores fail to meet expectations, the Euro could be weakened further.
With Sterling continuing its strong performance throughout Thursday, the Pound Sterling Euro 2016 exchange rate looks to complete its second consecutive week of gains and is forecast to end the week over a cent above its opening levels.