The Pound Euro exchange rate comfortably trended in the region of 1.17 over the past week for the first time since December.
GBP/EUR could see a further long-term recovery if ongoing Eurozone concerns worsen. The pair gained over a cent last week and is near its best 2017 levels.
Pound (GBP) Solid Despite Brexit Process Concerns
The Brexit process is set to begin in around a month – before the end of March 2017 – and the reality of the situation is still being digested by investors.
Concerns have been mounting that British growth would slow considerably during the Brexit process as the low value of the Pound hits the UK services sector.
Hopes that the Bank of England (BoE) would move towards tightening monetary policy have also faded this week, as BoE policymaker Kristin Forbes was confirmed to be leaving the role in June – just days after making hawkish comments about supporting tighter monetary policy if inflation continues to rise.
However, the Pound has advanced throughout the last week. Strong UK data as well as the higher UK growth forecast from the BoE earlier this month have kept demand for the Pound sturdy despite the high uncertainty of the Brexit process.
Euro (EUR) Weighed Down by Ongoing Political Jitters
A lack of major influential Eurozone ecostats this week has left Euro traders largely focusing on long-term political factors, many of which have hit headlines this week.
Earlier in the week, investors became increasingly concerned with the possibility that far-right anti-EU politician Marine Le Pen could win this year’s French elections, echoing the populist votes in Britain and the US last year.
Le Pen, a vocal critic of the EU, has stated she would take France out of the EU and the Eurozone. The possibility of France leaving the Eurozone has been a considerable downside in long-term Euro demand.
This week also saw Grexit concerns taking headlines once again as the row between the International Monetary Fund (IMF) and Eurozone lenders continued.
The IMF believed Greece should have some of its debt stricken off, while Eurozone governments believed Greece should undertake more austerity to meet debt goals.
Some tough spoken politicians, like Germany’s Finance Minister Wolfgang Schäuble, have even stated that Greece should leave the Eurozone if it wants any of its debts called off.
Pound Euro Long-Term Forecast: Could a Grexit Still be on the Cards?
The possibility of a Grexit has been a headline topper for years now and many are surprised that Brexit became a reality before crisis pulled Greece out of the Eurozone.
Despite this, as austerity protests in Greece intensify and Eurozone financial groups appear unwilling to give Greece considerable relief from its debts, concerns are sure to keep rising that Grexit could be a very real possibility.
If Greece is able to smoothly secure further bailouts and debt relief in the coming months, this will take significant pressure on the Euro.
However, this is not the only threat to the security of the Eurozone on the horizon.
Key elections will be held in major Eurozone nations this year which some fear could continue the wave of populism that began to rise last year.
There is of course France’s election ahead, but also elections in Germany and The Netherlands. Markets are also concerned about Italy’s debt issues.
If any of these major nations began steps to leave the Eurozone in the coming year or two, the Euro would certainly see a long-term plunge amid concerns that the currency bloc’s stability would be undermined.
GBP EUR Interbank Rate
At the time of writing, the Pound Euro exchange rate trended in the region of 1.17 while the Euro Pound exchange rate traded at around 0.85.
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