Pure FX Blog

10 November 2017

Euro Hits 1-Week High Versus Pound, as Eurozone GDP to Rise Faster

The euro to pound interbank exchange rate has reached its highest in 1 week today, or since November 3rd, at 0.8870, as the European Commission has upgraded the Eurozone's GDP forecasts. Image credit: William Lepretre.

The euro to pound interbank exchange rate has reached its highest in 1 week today, or since November 3rd, at 0.8870, as the European Commission has upgraded the Eurozone’s GDP forecasts. Image credit: William Lepretre.

by Peter Lavelle

Welcome to Pure FX’s latest update of the euro to pound interbank exchange rate.

The common currency jumps versus sterling! The euro to pound interbank exchange rate has reached its highest in 1 week today, or since November 3rd, at 0.8870.

The euro has strengthened against the pound, because yesterday the European Commission (EC) significantly lifted its GDP growth forecasts for the Eurozone for 2017.

To be specific, the EC now predicts that the European currency bloc will expand by +2.2% this year, the most since 2007, and far higher than both 2016’s growth of +1.8%, plus the Commission’s forecast in May of +1.7%.

It’s thought that Eurozone GDP will expand faster this year, both because the bloc has now overcome its 2012/13 debt crisis, and conquered the threat of populism in a set of recent elections.

According to the European Commission, Europe’s economy is being “propelled by resilient private consumption, stronger growth around the world, and falling unemployment,” thus lifting the euro.

The EC’s forecasts have strengthened the euro, first because, when the Eurozone expands faster, this makes investing in the bloc more profitable, thus attracting foreign investment.

What’s more, the Commission’s predictions have also helped the common currency, because if the bloc’s GDP rises more quickly, this lifts the odds that the European Central Bank will hike interest rates sooner!

Pound weakens, as May government hit by scandals

Moreover, the euro has also risen against the pound, because UK prime minister Theresa May’s government has been hit by a set of scandals recently.

This has dragged down sterling, because it’s feared that these scandals could topple Mrs. May’s fragile government.

In turn, this could disrupt the Brexit talks, making it tougher for the UK to secure a new trade deal with the European Union

Mrs. May’s government has been hit, first because defence secretary Michael Falloon recently resigned, following allegations of sexual harrassment.

In addition, Mrs. May has also been forced to sack aid minister Priti Patel, because Ms. Patel held a series of secret meetings with the Israeli government, when she was supposedly on holiday.

So, these scandals have dragged down the pound!

According to analysts at FxPro this week, “many are wondering if Theresa May’s tenure as prime minister may be near its end.”

In turn, there are concerns that, if Mrs. May stands down, rivals including foreign secretary Boris Johnson, Brexit secretary David Davis, and chancellor Philip Hammond may vie to become prime minister, all the while the Brexit deadline of March 2019 is drawing nearer.

With all this in mind, the euro to pound interbank exchange rate has hit this 1-week high today!

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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email peter.lavelle@purefx.co.uk.

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