GBP/EUR Slips as Weaker US Dollar Boosts Euro

November 25, 2016 - Written by Toni Johnson

STORY LINK GBP/EUR Slips as Weaker US Dollar Boosts Euro

The Pound Sterling to Euro exchange rate is edging down from a recent ten-week high. Chancellor Philip Hammond’s Autumn Statement was largely considered to be free from unpleasant surprises. Investors were cheered by news of increased business investment; Hammond seems to have plumped for long-term growth over short term economic relief.

UK GDP Remains Resilient Following Brexit; GBP/EUR Exchange Rates Remain Soft

News of firm economic growth and business investment following the Brexit vote has failed to support the Pound Sterling to Euro exchange rate today.

Preliminary estimates of Q3 GDP clocked in at 0.5% on the quarter and 2.3% on the year; as these were the second round of estimates and showed no change on initial readings there has been little here to generate demand for Sterling.

Business investment in the three months to September declined -1.6%, but this was not as bad as the fall from -0.8% to -1.6% expected. On the quarter, business investment slowed just ten basis points to 0.9% instead of weakening to 0.6% in line with projections.

According to ONS statistician Darren Morgan;

‘Investment by businesses held up well in the immediate aftermath of the EU referendum, though it's likely most of those investment decisions were taken before polling day. That, coupled with growing consumer spending fueled by rising household income, and a strong performance in the dominant service industries, kept the economy expanding broadly in line with its historic average.’

US Dollar Strength Helps Boost EUR/GBP as Euro Rebounds from German Fears

The Euro to Pound Sterling exchange rate has weakened significantly since the US elections, with EUR/GBP falling over five pence. Fears of rising populism initially weighed on the Euro, but more recently it has been concerns of an economic slowdown in Germany that have weighed on the common currency.

Wednesday and Thursday’s data proved concerning. The preliminary manufacturing and composite PMIs for the Eurozone’s powerhouse economy fell further-than-expected. Capital investment and construction investment failed to grow at the forecast rate in Q3, while the previous quarter’s declines were revised even higher.

Ifo confidence surveys also failed to hit market consensus scores. Overall, while the backwards-facing data for Germany is positive, the forwards-looking ecostats released so far are less encouraging.

However, after weakening on these figures, the Euro is staging a correctional recovery, assisted by a weakening US Dollar.

GBP/EUR Exchange Rate Forecast; Traders Could Return after Weekend to Key Brexit News

Devolved UK leaders are meeting with government ministers over the weekend to discuss the UK’s approach to Brexit. It is therefore likely that traders will return on Monday to find the split from the EU is back in focus.

The first meeting held between Theresa May and the three devolved leaders of Scotland, Wales and Northern Ireland hit the headlines due to the dismay of the Welsh and Scottish First Ministers at the government’s apparent lack of Brexit plans.
A repeat of this is likely to weaken the GBP/EUR exchange rate further as investors fear the UK still doesn’t have a solid plan for the exit.

Scotland has already been granted the right to intervene in the government’s Supreme Court appeal to the recent High Court ruling stating that Parliament must have a vote on the triggering of Article 50. Should the devolved leaders reiterate their intentions to defend the High Court’s decision, Pound Sterling may find some support.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Currency Predictions Euro Forecasts Pound Sterling Forecasts