GBP/EUR Rates To Come Under Pressure

A recent publication by DNB Markets, one of Norway’s largest financial services institutions claims EUR is likely to strengthen against GBP significantly in the short-term for two main reasons:

  • Whilst there has been strong economic data coming from the UK in the form of inflation data and retail sales it looks unlikely the Bank of England will raise interest rates in the near future.
  • As Brexit negotiations begin, the Eurozone is unlikely to lend many leniencies to the UK in light of the forthcoming elections throughout Europe.

Is populism losing its power?

The risk of Marine Le Pen winning the French Presidential election has decreased significantly according to the betting market. Odds are currently hovering at 4/9 for a Emmanuel Macron win in comparison to 3/1 for Marine Le Pen, implying odds of 69.2% and 25.0% for each candidate respectively. At the time of writing my last report (7th March 2017) Macron had a slim majority over Le Pen of just 4%, therefore if you have a EUR purchase requirement it may be wise to execute your trade now before Marine Le Pen’s grip on the election disappears altogether and GBP/EUR rates begin once again to head towards possible 1.13 levels.

Economic data releases this week

Thursday morning at 9:00am has the potential to move EUR rates with Consumer and Industrial Confidence figures released providing an insight into the potential of future spending levels of businesses (MPI) and consumers (MPC). We will also see Services Sentiment figures published at the same time, since the sector accounts for almost two thirds of total Eurozone area Gross Domestic Product this release is closely watched by investors as an indication of the future strength of the Eurozone.

Friday at 9:00am Consumer Price Index (CPI) figures are released, otherwise known as the inflation rate it is of particular concern in markets. The principal aim of ECB is price stability, resulting in an inflation rate target of 2.0%. Whilst the last CPI release (2nd March 2017) came in at 2.0% for the first time since January 2013 its Core counterpart, which strips out volatile food and energy prices remained at just 0.9%.

The consensus this time round is for the Core rate to remain at 0.9%, however if the actual is higher than the consensus this time round expect there to be a short-term spike in the market for those with a EUR selling requirement.

Todays Article 50 declaration may impact those buying or selling the Euro, so please get in touch with us on 01494 725 353 and a member of our team will be happy to assist.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.