GBP EUR Exchange Rate Slumps Ahead of Spring Budget

Modified: Thursday, 9 March 2017 15:45 BST - Written by Tim Boyer

STORY LINK GBP EUR Exchange Rate Slumps Ahead of Spring Budget

The British Pound to Euro exchange rate continued to slump on Thursday as investors bought up the Euro following the day’s press conference from European Central Bank (ECB) President Mario Draghi.

The typically dovish Draghi undertook a surprisingly hawkish stance during the presser, stating that downside risks in inflation had largely disappeared. The Eurozone inflation forecast for 2017 was also raised, boosting confidence and demand in the Euro.

[Previously updated 08/03/2017]

The Pound Euro (GBP EUR) exchange rate tumbled this morning ahead of Chancellor Philip Hammond’s spring budget.

Pound Euro (GBP EUR) falls as Markets Expect Dovish Budget

Sterling sentiment has plummeted this morning as reports suggest that the UK’s spring budget will not include an increase in government spending or possible tax reforms as some analysts had expected.

Following an unexpected boost in self-assessment tax receipts at the start of the year, which lead to the highest January surplus in public finances in 17 years, investors had hoped that Philip Hammond would use the additional funds to splurge a little this year.

However it appears that the Chancellor’s budget today will instead focus more on the measures he introduced in his Autumn Statement.


Brexit uncertainty can be partly blamed for the Chancellor’s more conservative approach to the budget, with Hammond expected to choose to bank the majority of January’s bumper tax revenues to leave him with a safety mat to fall back on.

While markets will be disappointed by the lack of spending or business rate cuts, they will likely be reassured by Hammond’s upbeat assessment of the economy, with the Chancellor expected to point out that the expected Brexit slump has largely been proved wrong.

Euro Rising on Upbeat Industrial Production Data

The Euro’s rise this morning was also supported by the release of some Upbeat Industrial Production Data from the Eurozone.

Markets were reassured by the recovery of Germany’s industrial sector after an unexpected slump at the end of 2016, with activity rebounding from -2.4% to 2.8% in January, outpacing estimates that it would only rise to 2.5%.

With Industrial production accounting for nearly 30% of Germany’s economy the rise should help to allay fears of a slowdown in the Eurozone’s largest economy, with the countries economics ministry predicting that this growth was likely to persist over the coming months.

Meanwhile industrial figures release by Spain also impressed this morning as production leapt from 2.0% to 2.5% over the same period. This is higher than the 2.4% rise predicted and reverses the downtrend seen in December after it fell from 2.9%.

However not all the data coming from the continent this morning was positive as France’s Trade Deficit was revised higher than expected in January as it surged from €3.6bn to €7.9bn, the highest deficit on record.

GBP EUR Exchange Rate Forecast: More Brexit Anxiety Ahead?

With Theresa May expected to trigger Article 50 the Pound Euro exchange rate is likely to remain subdued over the next couple of weeks as markets shy away from Sterling due to the uncertainty of the Brexit process.

Meanwhile the European Central Bank (ECB) will meet tomorrow, although it is unlikely to prompt much upwards momentum in the Euro as markets expect the Bank to hold interest rates at 0%, despite recent the uptick in the Eurozone economy.

At the time of writing the GBP EUR exchange rate was trending around 1.15 and the EUR GBP exchange rate was trending around 0.86.

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TAGS: Daily Currency Updates Euro Pound Forecasts