Pound Sterling (GBP) to Euro (EUR) Climbs Above Key 1.17 Level

November 18, 2016 - Written by Frank Davies

STORY LINK Pound Sterling (GBP) to Euro (EUR) Climbs Above Key 1.17 Level

The Pound to Euro exchange rate advanced on Thursday night despite performing flatly for most of the day as traders decided to go bullish on the day’s highly impressive UK retail sales results from October.

Despite hitting a weekly low of 1.1494 on Tuesday, GBP/EUR has largely trended near the week’s opening levels of 1.16. However, on Thursday the pair finally sustained some gains and by Friday morning was trending above the key level of 1.17.

Pound (GBP) Advances on Data and Euro (EUR) Weakness

This has been a highly mixed week for Pound movement, but weakness in the Euro has allowed Sterling to easily hold its ground and even sustain some gains towards the end of the week.

The British currency trended limply earlier in the week as it was weighed down by fresh concerns that the British government lacked any concrete plan for the Brexit process.

However, traders became more bullish on Sterling on Thursday and Friday thanks to a surprisingly strong UK retail sales report from October. Despite warnings that this strength would not last, the year-on-year figure of 7.4% was too good for investors to brush over.

Euro (EUR) Weakened by Variety of Downside Risk Outlooks

Since Donald Trump became the US President-elect last week, the Euro has been weighed down by concerns about the rising tide of populist politics and how protectionism could threaten the Eurozone and Euro project.

These concerns, as well as the ongoing bullishness of the US Dollar on December Fed interest rate hike bets, have severely limited the Euro’s movement in the last week despite some solid Eurozone ecostats being published.

Thursday’s final October Eurozone Consumer Price Index (CPI) figure improved to 0.5% as expected, and German producer prices also rose in October, beating expectations and narrowing its yearly contraction to only -0.4% despite expectations of a -0.9% contraction.

The week’s Eurozone datasets were unable to keep the Euro buoyant, especially as European Central Bank (ECB) President Mario Draghi took a dovish tone in a speech made on Friday.

GBP/EUR Forecast: Will Sterling Advances Continue on Bearish Euro?

The Pound to Euro exchange rate has largely trended with an upside bias all week and by Thursday and Friday had finally sustained some gains. While UK data supported the Pound, this movement has largely been due to ongoing Euro bearishness.

It seems highly likely that unless Pound-undermining Brexit news hits headlines before the end of the day, GBP/EUR is on track to complete another week of gains – this time by around 1%.

Will this movement continue next week however? The Euro has seen one of its worst ever losing streaks against its rival the US Dollar in recent weeks and as a result some analysts expect the shared currency will inevitably bounce back and be bought from its lows soon.

However, as December approaches, bringing the Italian constitution referendum and the date of the Fed’s potential interest rate hike, underlying Euro trade factors remain on the downside.

This means that the Euro may struggle to support a recovery rally of any kind unless next week’s Eurozone data impresses. This includes preliminary November PMIs from Markit as well as Q3 German Gross Domestic Product (GDP) results.

There is far less key UK data due for publication next week, but next Friday’s Q3 UK GDP scores may offer the Pound some boosts if they indicate that the first quarter since the Brexit one has been a good one for growth.

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