- 2017 Pound Euro Exchange Rate Near 1.15 – Pound recovers from slips on Tuesday
- Last Week’s News: BoE Policymaker Dissents – Hawkish Kristin Forbes vote boosts Pound
- GBP Update: UK Inflation Impresses – But BoE plays down importance of February stat
- EUR Forecast: March PMIs Ahead – Markit publishes its first March Eurozone stats on Friday
2017 Pound Euro Exchange Rate Recovers on Tuesday
Despite the dovish comments from Bank of England (BoE) Governor Mark Carney on Tuesday, investors were generally bullish on the Pound throughout the day due to the morning’s impressive UK inflation stats.
GBP EUR spent most of Tuesday fluctuating near the week’s opening levels however, as demand for the Euro was strong enough to limit the Pound’s gains.
Demand for the Euro strengthened on Monday night and throughout Tuesday as Eurozone political jitters faded slightly.
This was due to a strong performance from centrist, pro-EU French presidential candidate Emmanuel Macron during Monday’s televised French election debate. Markets are increasingly hoping he can beat anti-EU Marine Le Pen in the second round of the election in May.
[Previously updated 12:35 GMT 21/03/2017]
Tuesday morning saw the 2017 Pound Euro exchange rate easily recover from Monday’s drops thanks to an impressive UK inflation report from February.
The monthly Consumer Price Index (CPI) came in at 0.7% in February, beating expectations of a rise from -0.5% to 0.5%. Year-on-year inflation improved from 1.8% to 2.3%, beating the expected 2.1% and surpassing the Bank of England’s (BoE) target of 2%.
This caused GBP EUR to surge and the pair easily recovered to 1.15 from Monday and Tuesday morning’s low of 1.14.
However, comments from BoE Governor Mark Carney weighed slightly on GBP EUR gains. When asked about today’s stats during a Q&A on banking standards, Carney responded that the BoE would not ‘overreact to a single data point’.
[Previously updated 16:52 GMT 20/03/2017]
2017 Pound Euro Exchange Rate Slips to 1.14 on Monday
Brexit jitters worsened on Monday afternoon, dragging the 2017 Pound Euro exchange rate down to the level of 1.14 briefly.
While Brexit jitters could continue this week, if Tuesday’s UK Consumer Price Index (CPI) figures impress investors could still rush into the Pound. CPI will be the main event for GBP EUR trade on Tuesday.
Month-on-month inflation is projected to have improved from -0.5% to 0.5% in February, with yearly inflation rising predicted to rise from 1.8% to 2.1%.
This would put it above the Bank of England’s (BoE) target rate of 2% and if it comes in even higher than expected hopes will increase that the BoE could be pressured into tightening monetary policy.
[Previously updated 12:54 GMT 20/03/2017]
After testing two-week-highs again on Monday morning, the 2017 Pound Euro exchange rate slipped in the early afternoon when the UK government announced its intended activation date for Article 50.
Article 50 is the formal EU process that would begin Britain’s withdrawal from the bloc – the Brexit.
The government confirmed that Brexit would begin on the 29th of March – just over a week away.
This left Pound investors still hoping for the process to somehow be delayed disappointed. Sterling was sold from its highs as a result.
However, GBP EUR was able to tread water above the level of 1.15 for most of the morning due to increased Bank of England (BoE) tightening bets since last week.
[Published 06:00 GMT 20/03/2017]
Last week saw the 2017 Pound Euro exchange rate make a notable recovery despite Brexit jitters and mixed UK data, as one Bank of England (BoE) policymaker unexpectedly voted to hike UK interest rates from their record lows.
GBP EUR began last week trading at a near two-month-low of 1.13 but towards the end of the week tested highs of 1.15. While the pair remained volatile, it was near the level of 1.15 at the end of the week’s European session.
Pound (GBP) Benefits from Bank of England (BoE) Hawk Forbes
Last week saw a relatively unusual meeting from the Bank of England (BoE). While UK monetary policy was indeed left frozen as expected, the Pound surged as one member of the Monetary Policy Committee (MPC) had actually voted to hike UK interest rates from their record-low of 0.25%.
Kristin Forbes, a known MPC hawk, has argued in recent months that rates should rise to tackle surging UK inflation. Last week she voted 1-8 to hike UK interest rates.
This bolstered market hopes that other policymakers may soon follow suite and tighten UK policy again at a faster pace than previously expected.
In an opinion piece for The Telegraph following the decision, Forbes wrote that recent weakness in wage growth was due to temporary uncertainty.
She believed underlying UK inflation was strong and played down the threat of downside risks in higher rates, as well as arguing that slows in consumer spending would not be significant;
‘This softening … should only be moderate, due to support from resilient consumer confidence, solid house prices, low unemployment, and easy access to cheap credit,
There are risks consumers could pull back more sharply – but these are still just risks.’
The market consensus has become more hawkish overall due to Forbes’ actions, with most analysts and traders expecting tighter monetary policy by the end of 2018 rather than 2019.
Euro (EUR) Sees Relief Following Dutch Election 2017
Last week saw Dutch citizens taking to the polls to vote in The Netherlands’ 2017 general election.
Euro traders were initially concerned that anti-EU populist candidate Geert Wilders could somehow win and indicate that nationalist mindsets were rising following last year’s Brexit and Trump votes.
However, Wilders and his Party for Freedom (PVV) came in a distant second behind the party of Dutch Prime Minister Mark Rutte and other parties do not wish to cooperate with Wilders due to his anti-EU stances.
Wilders’ party is not expected to be included in coalition talks, which will see Rutte discuss with other parties to form a coalition big enough for a Parliament majority.
This was a relief to Euro traders as Wilders had stated on the campaign trail that he wishes to withdraw The Netherlands from the Eurozone – which would be a significant risk to the future of the Euro currency.
It also increased hopes that anti-EU populist politics would become less influential, including in the upcoming 2017 French election. However, ultimately the 2017 Pound Sterling Euro exchange rate still advanced on BoE news.
2017 Pound Sterling Euro Forecast: UK Inflation Stats in Focus
After Bank of England (BoE) policymaker Kristin Forbes voted to hike UK interest rates due to rising inflation last week, investors are now even more highly anticipating the latest British Consumer Price Index (CPI) report.
February Consumer Price Index figures will be published this coming Tuesday and are likely to be the biggest influence on 2017 Pound Sterling Euro exchange rate movement this week.
If UK inflation increased at a faster pace than expected in February, more investors will begin to bet that the Bank of England could soon be pressured into tightening UK monetary policy again.
However, if inflation slips, analysts may argue that Forbes’ outlook was incorrect and the Pound may plunge.
UK retail sales for February are also in focus next week and will show whether or not Britain’s retail sector has continued to slow on higher prices and lower spending.
Over in the Eurozone, next week’s trade session will be relatively quiet until towards the end of the week, when Markit will publish its preliminary March PMIs for the currency bloc.
Political concerns will also continue to affect GBP EUR next week. As the beginning of the Brexit process at the end of March draws ever-closer and French election polling continues to shift, the 2017 Pound Sterling Euro exchange rate could be in for another week of volatile trade.