Macron’s victorious, so what next for the euro?

By Carol Schleisman

THE second half of April saw the pound fall from a multi-month best of 1.1990 against the euro, but it hit a succession of new highs against dollar currencies like those of the US, Australia, New Zealand and Canada.

GBP/EUR was trading in the region of 1.16 euros this time last month, but it is currently holding at 1.18.

The euro, meanwhile, strengthened after the first round of the French Presidential elections, with EUR/GBP fluctuating between highs of £0.85, and lows of £0.83.

The euro’s performance against the US dollar has been more impressive, with a dramatic drop-off in demand for the North American currency, causing EUR/USD to rocket from $1.05 to $1.10.

Politics remained the driving force behind currency-market movement as May began. The pound was still elevated, following UK Prime Minister Theresa May’s decision to bring forward the General Election to 8th June.

The currency climbed to some of its best levels since the UK voted to exit the European Union.

However, GBP/EUR gains were limited, as the euro responded positively to the outcome of the first round of the French Presidential election, which saw centrist Emmanuel Macron and far-right Marine Le Pen progress to the second round.

The euro continued edging gradually higher as polls gave Macron a decisive lead over his rival.

After the 2016 shocks of Brexit and the US election, there had been some concerns that Le Pen might snatch an unexpected victory and up the odds of a ‘Frexit’ (French exit from the EU) in the process.

Yet polls proved accurate this time, and Macron took the Presidency with a convincing 66% of the vote.

And, as the outcome was expected, the euro didn’t strengthen too much, although it did manage to achieve its best levels against the US dollar since last November.

There’s now only a month to go until the UK General Election, so any forecasts relating to the outcome of the vote will be the catalyst for a GBP/EUR exchange-rate movement.

If it appears that the Conservatives will increase their majority, the pound will strengthen on hopes that PM May’s Brexit negotiating power will improve.

However, GBP/EUR could drop if there are any signs that Labour support is gathering momentum (or that a coalition could be formed in order to keep the Conservatives out).

The biggest causes of euro movement over the next couple of weeks include the French parliamentary elections and Eurozone inflation figures.

If the rate of inflation in the currency bloc falls, it could deter the European Central Bank (ECB) from increasing interest rates in the near-future, leaving the Euro under pressure.

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Posted by on May 12 2017. Filed under Business & Finance. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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