The Pound Euro exchange rate emerge further from its multi-year lows last week and since last Friday has trended above the key level of 1.16 and its best levels since September. Trump’s win of the US Presidency last week has left markets speculating about what could be in store for some of the world’s major economies in the coming months and years.
Pound (GBP) Reaches Key Support Levels on Hope for Trump Trade
Last week saw one of the Pound’s best performances in months and it was almost entirely due to implications from US President-elect Donald Trump about the future relationship between the UK and the US.
Trump and his transition team have stated that Britain is a close ‘friend’ of the US, and that it would be prioritised in trade-deal talks during the Trump Presidency.
However, on Monday UK Prime Minister Theresa May stated that she wished for Britain to become a global leader in free trade. Some investors took this to mean the UK and US’ views of trade would not match, which dented Sterling demand on Monday.
Euro (EUR) Weighed Down by Fears of Strengthening Populism
After the Brexit vote and the Trump win of the US Presidential election over the last year, many analysts begun to consider nationalistic populism as a more genuine platform for politics than they had in the past.
The possibility of populism also rising in Eurozone countries in the next few years has been the subject of much speculation from political and market analysts in the last week, due to the perceived threat this could have on the Euro project.
If one Eurozone country, let alone many, were to abandon the Euro due to taking a more nationalistic political stance, the Euro itself could be thoroughly undermined. This has weighed on Euro demand since markets adjusted to Trump’s win last week.
Pound Euro Exchange Rate Long-Term Forecast: Eurozone Under Threat?
Most of the factors behind the Euro’s weakness over the last week have been related to the possibility of a long-term fallout of sorts for the shared currency.
Namely, if a key country in the Eurozone were to exit the currency bloc, what would happen to the Euro and the future of the single currency?
Investors are likely to pay closer attention than before to next month’s constitutional referendum in Italy as well as next year’s leadership elections in France and Germany.
If protectionist policies continue to become more popular like they had in the UK and US, the Euro’s short and long-term outlook could be on the downside.
However, the lower value of the Euro since last week could also offer some relief to the European Central Bank (ECB) and its quantitative easing (QE) program. This could help spur along the Eurozone’s economic recovery.
As for the Pound, ongoing speculation about the possibility of a UK-US trade deal could continue to help Sterling hold its ground. This means GBP EUR could be in store for some long-term recovery until Article 50 and Brexit talks hit the Pound again in the coming months.
At the time of writing, the Pound Euro exchange rate trended in the region of 1.16, while the Euro Pound exchange rate traded at around 0.86.
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