EUR/GBP - page 8
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British Pound to Euro Exchange Rate: Cheap GBP Offers More Gains say ANZ
Foreign exchange strategists at ANZ Research are bullish on the British Pound’s prospects against the Euro next week.
The call comes following a particularly good week for Sterling in which it struck its best level against the shared currency since September 6.
In a client briefing ANZ’s Daniel Been expects political uncertainty in the UK to remain elevated with the government appeal to the Supreme Court on Brexit opening on 5 December.
But, the ruling won’t be revealed until early next year and the timing could allow Sterling a period of Brexit-related stability in which to recover lost ground.
“The GBP remains vulnerable to political events,” says Been. “However, with solid growth; the BoE firmly on hold; and with no major policy events in the near-future - the Pound looks cheap at current levels.”
Indeed, the economy has performed surprisingly well - with growth at a solid above-trend 0.5% quarterly pace in Q3.
The month of December has gotten off to a decent start on the economic growth front with PMI surveys of the construction and manufacturing sectors revealing robust growth as we close out what has been an unprecedented year for the UK politically.
Meanwhile, in the Eurozone policy uncertainty looks set to rise – especially if the ‘no’ camp should prevail at the Italian referendum.
“In addition to that, ECB President Draghi is largely expected to announce an extension of QE at the next ECB meeting (on 8 December) which could add to downward momentum for the euro,” says Been.
“GBP at the moment looks like good value and, if investors’ sentiment towards the euro area deteriorates, we think EURGBP could weaken from current levels,” says Been.
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British Pound To Euro Forecast - Is Best GBP/EUR Exchange Rate Likely After Italy Referendum, Supreme Court Brexit Hearing?
Foreign exchange investors saw the British pound to euro exchange rate climb to near the best multi-month conversion in anticipation of the impending Italian Referendum and UK Supreme Court hearing on Article 50 appeal. We examine the latest euro-related fx forecasts targeting the sterling and the US dollar in the short, medium and long-term GBP/EUR forex outlooks
Foreign currency investors have welcomed the recent rise in the GBP/EUR rate to near best levels in over 12 weeks.
Speculation over the future of the UK economy outside the EU has continued to dominate the outlook of Pound Sterling (GBP) in recent days, with hopes of a softer form of Brexit rising.
Commentary from Brexit Secretary David Davis suggested that the UK could pay to maintain its current level of access to the single market, a prospect that greatly encouraged confidence in the Pound.
Further volatility for the Pound Sterling Euro (GBP EUR) exchange rate is likely in response to the start of the government’s appeal to the Supreme Court on whether Parliament has a right to vote on the triggering of Article 50.
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A Renzi Rebound: Pound to Euro Exchange Rate Slumps 0.8% - is the Recovery now Dead?
The British Pound has slumped while the Euro rockets higher in response to the outcome of the Italian referendum - is this the end of the rally?
The Euro was the best-performing G10 on the day it was announced Italians were not going to accept the proposals forwarded by their Prime Minister Matteo Renzi to change the country's constitution.
The initial knee-jerk reaction to news that No had carried the day was to sell Euros, which allowed GBP/EUR to breack 1.20 for the first time since July 22.
However, the losses have since been pared and reversed as markets show an incredible ability to shrug off the entire event:
"The swift recovery of the markets despite the ramifications that the referendum may have for the Eurozone is notable – in a year of financial shocks such as Brexit and the Trump election victories, it is entirely possible markets are becoming more resilient," says Paresh Davdra at RationalFX.
Renzi is set to resign and markets are acutely focussed on the outlook for Italian banks, many which will need funding over coming weeks.
How does the political vacuum opened by Renzi impact on the functioning of Italian money markets?
"The immediate market focus will be on the struggling banking sector. Not least because the new resolution regime makes government support much harder, Italy has been desperate to find capital via the private sector. The fate of the ongoing capital raising of Monde dei Paschi di Siena is first on the line, and its success or failure will have material consequences for the other banks," says Holger Sandte at Nordea Markets.
Sandte believes the need for further government support, in one form or another, has increased with the clear no vote. Still, the outlook for the state being able to contribute to solving the problems of the Italian banks for good would require a strong government – something that looks unlikely for now.
Lorenzo Codogno, a former chief economist at the Italian Treasury tells Wake up to Money that he doesn't expect an early election, or a referendum on the Euro.
But, the country's political gridlock will continue until at least 2018, as a new caretaker government struggles to keep the peace.
President Mattarella will most likely launch new government formation talks within the current parliament.
"On the government bond markets, there were rumours that the ECB was willing to use the flexibility offered by its QE programme to prevent a sharper rise in Italian bond yields. A failure to do so could become self-fulfilling in the short-term, as it would dent confidence in the central bank’s ability to control the bond markets," says Sandte.
The prospect of a financial crisis on the back of the No vote and Renzi's resignation are however considered small by Sandte:
"It is true that markets have largely shrugged off seemingly ex-ante market-unfriendly outcomes quickly several times in the past (e.g Brexit and the US presidential election). It would thus be premature to call for another crisis in financial markets, especially as the no vote was expected, even if the margin was surprisingly large."
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Outlook for Pound to Euro Exchange still Positive Despite EUR's Italian Referendum Short-Squeeze
The Euro has been the strongest performer over the past 24 hours but the gains are unlikely to halt the British Pound's recovery rally.
The Euro was the best-performing G10 on the day it was announced Italians were not going to accept the proposals forwarded by their Prime Minister Matteo Renzi to change the country's constitution.
The initial knee-jerk reaction to news that No had carried the day was to sell Euros, which allowed GBP/EUR to breack 1.20 for the first time since July 22.
However, the losses were quickly pared and reversed as markets show an incredible ability to shrug off the entire event:
"The swift recovery of the markets despite the ramifications that the referendum may have for the Eurozone is notable – in a year of financial shocks such as Brexit and the Trump election victories, it is entirely possible markets are becoming more resilient," says Paresh Davdra at RationalFX.
"Markets outside Italy were apparently largely prepared for a ‘No outcome’ and didn’t see any big global consequences outside Italy. The market was even ripe for some kind of short-squeeze as the event risk was out of the way," says Austin Hughes at KBC Markets in Dublin.
It is this short-squeeze of negative bets against the Euro, built in the run-up to the referendum, that saw the Euro push sharply higher.
In a few waves the euro was squeezed higher. The pair already set a ST correction top north of 1.07 around noon," says Hughes. "The reaction of sterling, especially of EUR/GBP, was as remarkable in EUR/USD."
Hughes notes EUR/GBP temporary filled bids below the 0.8333 support area early in Asia. "However, from the start of European trading, EUR/GBP joined the short squeeze of EUR/USD."
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Sterling Jitters See Euro To Pound Exchange Rate Edge Higher As ECB Decision Approaches
Currency exchange markets saw the Euro to Pound rate edge back towards its highs as Britain’s Supreme Court appeal continued to cause jitters in GBP trade.
However, the Euro was weakened later in the day by comments from Italian Interior Minister Angelino Alfano. Alfano indicated that there may be an Italian election in early 2017, which concerned traders.
On Wednesday EUR/GBP is likely to firm as investors begin to anticipate Thursday’s European Central Bank (ECB) meeting. The bank is still expected to extend its easing measures.
The Euro Pound exchange rate edged back towards its highs on Tuesday afternoon as Britain’s Supreme Court appeal continued to cause jitters in GBP trade.
However, the Euro was weakened later in the day by comments from Italian Interior Minister Angelino Alfano. Alfano indicated that there may be an Italian election in early 2017, which concerned traders.
On Wednesday EUR/GBP is likely to firm as investors begin to anticipate Thursday’s European Central Bank (ECB) meeting. The bank is still expected to extend its easing measures.
The fallout from Italy’s weekend referendum has seen the Euro to Pound Sterling exchange rate weakening, although the continued UK Supreme Court hearing is limiting GBP gains.
Both the Eurozone and the UK are in the grip of uncertainty, keeping the Euro to Pound Sterling exchange rate marginally below opening levels.
The resignation of Italian Prime Minister Matteo Renzi, following the defeat of the constitutional change referendum on Sunday, continues to keep investors wary of the Euro.
The markets are surprisingly calm considering the potential fallout from the referendum, although the polls had consistently indicated that the ‘Yes’ camp would be defeated, meaning the result was not a shock, as happened with ‘Brexit, and was therefore strongly priced into the Euro already.
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A Le Pen Win Would Keep Pound to Euro Exchange Rate on the Rise in 2017
Societe Generale have confirmed the Euro will recover notably against the British Pound and US Dollar in the second half of 2017 on the assumption that Front National's Marine Le Pen doesn't win the French Presidency.
Political risks are rooted across the channel in 2017 and elections in the Netherlands and France will be key to deciding how the Pound performs against its larger continental cousin.
Brexit and Trump have shown us how political upsets can work on currency markets, and foreign exchange traders will have these memories fresh in their minds as they move through the year.
Nerves over unexpected electoral outcomes should cap any exuberance in the Euro and will likely ensure the recovery we have been witnessing in the GBP to EUR conversion in the fourth quarter of 2016 extends.
Analysts at France's thrid-largest bank, Societe Generale, say they believe the Euro will continue to weaken through the first quarter of 2017 on uncertainty over whether anti-EU candidate Marine Le Pen will pose a significant challenge on the establishment candidates from the centre ground.
This uncertainty should pull EUR/USD towards parity, a move that will suck EUR/GBP lower.
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