The 2017 Euro Pound exchange rate has advanced to its best levels since November of over 0.87 in the last week. EUR GBP could see another year of overall gains throughout 2017, as the outlook for the Euro has improved somewhat, while Sterling appears to be in for another bumpy ride.
Euro (EUR) Demand Improves after European Central Bank (ECB) Minutes
The perceived bearish patterns of the Euro have been relieved slightly over the last week, owing to solid domestic ecostats as well as further clarity on the European Central Bank’s (ECB) 2017 outlook.
On Thursday Germany’s full 2016 Gross Domestic Product (GDP) results were published. Growth in the nation came in at 1.9% – a stronger print than the expected 1.8% and an improvement from the previous figure of 1.7%.
Demand for the Euro saw a more significant boost following the publication of the European Central Bank’s (ECB) December meeting minutes.
The ECB agreed to extend the controversial quantitative easing (QE) program in December, but according to the minutes not all policymakers were behind the extension.
This boosted hopes that officials would see QE as increasingly unnecessary in the coming year and may even taper back the program.
However, news that far-right populist Marine Le Pen had performed better-than-expected in early polling for this year’s upcoming French general election could give investors something to be concerned about.
Pound (GBP) Weakened by News of Prime Minister’s Brexit Speech
Sterling has been undermined by Brexit concerns once more in the last week. Markets continue to focus on whether or not the UK will be able to maintain access to the EU single market following the Brexit process.
Hopes were hit last weekend when UK Prime Minister Theresa May stated in an interview that the UK would not simply be able to hold onto ‘bits’ of EU membership.
Investors only grew increasingly concerned towards the end of the week when it was confirmed that May’s highly anticipated Brexit speech would be held on Tuesday the 17th.
The speech has been touted as an opportunity for May to ease concerns about the Brexit process to citizens and markets, but traders fear that more clarity will simply mean May will deliver the final nail in the ‘single market hopes’ coffin.
2017 Euro Pound Forecast: Could ECB Pull Back on QE in the Coming Year?
Following the publication of the European Central Bank’s (ECB) latest minutes report and what it revealed about policymakers who didn’t agree to extend quantitative easing (QE), speculation is sure to flare up that QE may not be as necessary as feared.
This will play a major factor in ECB speculation and speculative trading on the Euro throughout the year. Analysts and traders are likely to continue to expect ECB officials to consider cutting the QE program short (or ‘tapering’ it).
Analysts believe that some policymakers disagreeing with a QE extension means they think the Eurozone may not need it for much longer, which is an upside for the ECB’s growth outlook which was unanimously dovish in early 2016.
While traders will likely not begin to get their hopes up on tapering until later in the year, it remains a promising upside factor in mid to long-term Euro trade. Analysts also speculate the possibility of inflation boosts in the US may have a knock-on effect and improve the Eurozone’s struggling consumer price growth.
As for the Pound, the outlook for the British currency is unsurprisingly bearish. With the Brexit process set to begin in March and traders gradually giving up on hopes that full single market access will be possible at the end of the process, Sterling will continue to see significant downside pressure in the long-term.
EUR GBP Interbank Rate
At the time of writing, the 2017 Euro Pound exchange rate trended in the region of 0.87, while the Pound Euro exchange rate trended at around 1.14.
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