GBP EUR Exchange Rate Rallies from Worse Levels Amid Euro Profit Taking

April 26, 2017 - Written by Frank Davies

STORY LINK GBP EUR Exchange Rate Rallies from Worse Levels Amid Euro Profit Taking

The Pound Euro (GBP EUR) exchange rate began to trend higher this morning as investors moved to consolidate their recent gains.

The Euro’s advance was halted this morning as markets saw an opportunity for profit taking, following the single currency’s rally after the result of first round voting in the French Presidential elections.

Markets were buoyed as centrist Emmanuel Macron progressed to the second round where he will face off against the far-right Marine Le Pen.

Investors were also relieved as the Pro-EU Macron is seen as a stabilising influence on the Euro as he pushes for stronger ties with Brussels whilst avoiding any radical economic reforms.

Recent polls also suggested that Macron is expected to win the second round with around 61% of the vote, bolstering the single currency further.

The softening of the Euro can also likely be attributed to some trepidation ahead of the European Central Bank’s (ECB) latest policy meeting tomorrow as the bank is expected to maintain its dovish outlook.

With the Eurozone inflation having tumbled in March amidst falling fuel prices, policy makers are likely to feel validated in their decision to hold interest rates at a record low of 0%, with analysts predicting that ECB President Mario Draghi will also continue to argue that the high level of political uncertainty in Europe is another factor in leaving rates unchanged.

However the Pound gains are likely to be slowed somewhat today as a gloomy economic outlook from economists has led to forecasts that the UK’s GDP is likely to have slipped in the first quarter of 2017, with analysts believing that the consequences of Brexit are finally beginning to catch up with the economy.

Data released on Friday is expected to show that the UK’s economy grew 0.4% in the three months leading to March down from 0.7% growth in the fourth quarter of 2016, with analysts attributing the fall to slowing consumer consumption as rising inflation forces households to reign in their spending.

Howard Archer, chief UK economist at consultancy IHS Global Insight, said;

‘It looks inevitable that consumer spending made a substantially reduced contribution to growth. Additionally, we expect businesses to become more cautious over investment as the economy shows mounting signs of slowing.’

Looking ahead the GBP EUR exchange rate may push higher again on Thursday if Nationwide’s UK Housing figures show that house prices rose again in April after unexpectedly contracting in March.

Meanwhile Germany’s latest Consumer Confidence is expected to rise from 9.8 to 9.9 in May possibly helping the Euro to offset any potential losses from the ECB policy meeting tomorrow morning.

Current Interbank Exchange Rates

At the time of writing the GBP EUR exchange rate was trending around 1.17 and the EUR GBP exchange rate was trending around 0.84.

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TAGS: Daily Currency Updates Pound Euro Forecasts