GBP/EUR Exchange Rate Stutters as Macron Puts Political Risk to the Sword
The Pound to Euro exchange rate ended the first week of March at 1.1575 having commenced the week at 1.1681.
The slide suggests that momentum has shifted firmly into negative territory.
Driving a resurgent Euro was news that the markets’ favourite candidate for the upcoming French election appears to be building a commanding position over his rivals.
The Euro exchange rate complex jumped higher on a new poll which showed Emmanuel Macron finishing ahead of far-right leader Marine Le Pen in the opening round.
Until now most polls had Le Pen winning the opening round but losing in the second as support crystallises against the far-right candidate.
The Odoxa poll put Macron on 27% in the first round on April 23 with Le Pen behind him on 25.5% and Fillon on 19%.
The Euro has struggled over recent weeks on signs that Le Pen - a candidate that would pull France out of the Eurozone and then the European Union - had been gaining in polls.
"We saw a peak of panic in February when the focus was on Le Pen," says Christian Lenk, an analyst with DZ Bank. "It's always been clear that the odds of Le Pen becoming the next President were quite low and now we see confirmation of that in the polls."
The Pound to Euro exchange rate has fallen 1.1607 amidst the strong performance of the single currency, having started the day on 1.1680. It had gone as low as 1.1573 earlier in the day.
International payments are being offered around 1.13-1.14 while independent payment specialists are offering you exchange rates above 1.15.
The Euro to Dollar exchange rate has risen to 1.0559 having started the day at 1.0507 and had gone as high as 1.0574 at one point during the day.
The poll comes a day after Macron promised a blend of fiscal discipline and stimulus to strengthen a feeble economic recovery, another reason financial markets have taken a shine to the independent candidate.
However, analyst Shaun Osborne at Scotiabank tells us it is too soon to back a fully-fledged Euro recovery saying his bank’s stance is to “maintain a bearish EUR outlook” in the second quarter.
“Relative central bank policy is dominant and interest rate differentials are set to remain a drag on EUR in an environment of policy divergence,” says Osborne who is targeting EUR/USD at 1.02 by mid-year.
“Looming political risk events present an added headwind for EUR, given their potential to exacerbate existing scarcity issues as investors compete with the ECB in a scramble for German bunds,” says Osborne.
