British Pound To Euro Exchange Rate Forecast: Best GBP / EUR As Sterling Jumps 1% On May's Transitional Brexit

Foreign exchange investors saw the British pound to euro conversion rate extend its best run as the impending Italian Referendum and French Election adds downward pressure to the single currency. 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

• The Pound to Euro exchange rate today (21-11-16): +1.03% higher on the day at 1 GBP = 1.17653 EUR, best on Friday 1.1726, best in 52-wk range 1.4419.
• The Euro to Pound exchange rate today: -1.03% at 1 EUR = 0.84996 GBP, best in 52 weeks 0.8636.
• The Euro to Dollar exchange rate today: +0.35pct higher on the day at 1 EUR = 1.06207 USD.
• The Pound to Dollar exchange rate today: +1.37% at 1.24921.
• GBP/EUR, GBP/USD conversations jump on Monday as PM May hints at transitional Brexit for UIk businesses.
• British Pound forecast: Sterling-Dollar range vulnerable to Trump-inspired USD rally.

Monday's Brexit headlines have seen the British pound leap higher against the euro and the US dollar as PM May hints at a transitional deal for softening the blow for business.

The Pound continued to enjoy the effects of Prime Minister May’s “transition” indications on Monday afternoon, allowing it to easily surge against the Euro.

While the Euro remained sturdy on hopes that increasingly popular protectionist politicians could be kept out of power during 2017’s Eurozone elections, this was not enough to hold a bullish Sterling at bay.

The odds seem to increasingly point towards Philip Hammond’s first Autumn Statement offering less in the way of fiscal support than markets had previously anticipated.

This has limited the appeal of the Pound on Monday morning, with the latest speech from Prime Minister Theresa May doing little to improve the outlook of the GBP/EUR exchange rate.

With political worries mounting and the increasing odds of the Fed raising interest rates before the end of the year the GBP/EUR rate is expected to remain on a stronger footing.

Fresh anxiety over the issue of Brexit weighed increasingly on Pound Sterling (GBP) exchange rates ahead of the weekend, with investors discouraged by the harder line of rhetoric being adopted by European officials.

As the UK government is seen to be in a possible state of disarray over its goals for when formal negotiations begin the outlook of the domestic economy remains overshadowed by uncertainty.

Thus, in spite of European Central Bank (ECB) President Mario Draghi adopting a more dovish tone on monetary policy the Pound Sterling Euro (GBP EUR) exchange rate was prompted to trend lower.

Latest Pound/Euro Exchange Rates

British Pound (GBP) to Extend Best Levels Against Euro (EUR) as Italian Constitutional Referendum Draws Closer.

The euro is forecast to face heavy selling pressure against major currency rivals as political fears take centre stage once more.

The major political upsets in both the UK and US appear to increase the likelihood of Italian Prime Minister Matteo Renzi suffering a defeat, which could throw the future of the currency union into question as researchers at BHH noted:

‘While the nationalism/populism has altered the course of these two countries, it may be an acid that dissolves the glue that binds Europe together. Italy's constitutional referendum and the Austrian presidential election in early December seem to be appetizers for the main course, the French presidential election in the spring, where the odds of the National Front winning seem to be rising.’

Developments in Greece could also offer a boost to the GBP/EUR exchange rate, with tensions rising as German Finance Minister Wolfgang Schäuble dismissed the latest renewed calls for creditors to offer debt relief to the stricken economy.

Related Euro Headlines

• Euro, Dollar Flirt With Parity - Wall Street Journal
• Euro suffers longest losing streak on record, as Goldman Sachs predicts pound will sink to $1.14 by end-2017 - Telegraph.co.uk
• Euro record losing streak: what's behind the drop in the single ... - Telegraph.co.uk
• Europe is 'unlikely' to seize euro-based clearing from London, says S&P - Telegraph.co.uk
• Dollar Extends Record Streak of Gains Versus Euro on Trump Plans - Bloomberg

GBP/EUR Exchange Rate Predicted to Trend Lower on Disappointing Autumn Statement

The appeal of the GBP/EUR exchange rate is likely to weaken, however, in advance of Chancellor Philip Hammond’s first Autumn Statement.

Investors are bracing for a less fiscal stimulus measures than previously hoped for, given the UK economy’s relatively robust performance in the wake of the Brexit vote.

Nevertheless, if Hammond fails to excite markets with a greater shift away from George Osborne’s austerity measures then the GBP/EUR conversion can be expected to soften.

Euro (EUR) Exchange Rates Volatility Likely on Eurozone PMIs

Monday’s raft of Eurozone PMIs could offer the Euro another rallying point, providing that economic activity is shown to have remained solid in November.

However, forecasts suggest that while the overall measures may have improved on the month there could be fresh signs of a stalling within the German economy.

The relative strength of the US Dollar (USD) is also likely to drag on the Euro, given that markets now consider a 2016 interest rate hike from the Federal Reserve to be almost a done deal.

Lloyds Forecasts for the Sterling-Euro Conversion Rate in 2017

"Our monetary policy outlooks for the respective central banks suggest there may be additional upside to GBP/EUR."

"Given the robust economic data in the UK and shift in tone from MPC members, we no longer expect further easing from the BoE."

"In contrast, with euro area inflation likely to remain below the 2% target for the foreseeable future, we anticipate the ECB extending its asset purchase programme for a further six months, out to September 2017."

So where do the analysts at Lloyds bank see the pound to euro exchange rate in the short, medium and longer-term outlooks?

"Shifts in short-term sentiment around both EUR and GBP leave the cross vulnerable to heightened volatility."

"But, in the medium term, we expect the pair to drift higher towards 1.21 by end-2017."

GBP & EUR Economic Events in This week's Forex Calendar

The GBP-impacting events over the next seven days include the Public Sector Net Borrowing (Source), the CBI Industrial Order Expectations (Source), the Inflation Report Hearings (Source), the CBI Realized Sales, the Autumn Forecast Statement (Source), the GfK Consumer Confidence (Source), the BBA Mortgage Approvals (Source), the Nationwide HPI (Source), the Second Estimate GDP , the Prelim Business Investment and the Index of Services 3m/3m.

The EUR-impacting events over the next seven days include the French Flash Manufacturing PMI (Source), the French Flash Services PMI, the German Flash Manufacturing PMI, the German Flash Services PMI, the Flash Manufacturing PMI, the Flash Services PMI, the Italian 10-y Bond Auction (Source), the German Buba Monthly Report, the Consumer Confidence (Source), the GfK German Consumer Climate (Source), the ECB Financial Stability Review, the German Final GDP (Source), the German Ifo Business Climate (Source), the Belgian NBB Business Climate (Source), the German Import Prices , the French Consumer Spending (Source), the Italian Quarterly Unemployment Rate (Source), the Italian Prelim CPI and the Italian Retail Sales.

Euro to Dollar Exchange Rate Driven by French election Risk Say MS

Morgan Stanley see the EUR exchange rate's key risk in the near-term as the French election:

"EURUSD is largely driven by the USD side meaning that the pair could move slowly lower,expecting 1.04 by year-end. However, we think EUR should remain strong on the crosses, particularly EURJPY.

Eurozone political events are now treated as binary risks for the EUR. We believe the main one to focus on is the French election, where we await the results of the Republican primaries."

EUR/GBP Outlook From Leading FX Institutions

Société Générale suggest the EUR/GBP exchange rate could rally on the upcoming Autumn Statement:

"Wednesday’s Autumn statement in the UK doesn’t look set to see much fiscal largesse as the Chancellor gets the economy ‘match fit for Brexit’."

"Public finances are not in good shape and Mr Hammond has no appetite for a major increase in borrowing."

"That, along with Wolfgang Schauble’s hard line on Brexit negotiations, won’t help the pound which has seen some reduction in short positions according to last week’s CFTC data."

"A brief sortie by EUR/GBP back up to 0.88 is possible."

Lloyds also suggest the GBP/EUR uptrend won't last in the near-term:

"While the short-term trend is still very much down and expected at this stage to gradually work its way down to the 0.84-0.83 region (summer lows and key weekly trend support), near-term studies are more constructive."

"As such we see the risk of a move back to the 0.8655/60 region, with a break there suggesting a broader correction back towards 0.8765/75."