Will The Sterling Strengthen Against The Euro?

The Momentum is with the GBP as EUR Concerns Mount

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The GBP/EUR currency pair has shown a definite degree of bullishness since March 2017. The positive momentum that we see with the GBP is likely to take the GBP/EUR as high as 1.24 over the short-term. While that remains some ways off, the trend is clearly favouring a rising GBP. Already, the GBP/EUR has broken above the 200-day moving average of 1.164 and the 50-day moving average of 1.165. These technical indicators give a clear indication of the current rising trend. Perhaps the more pertinent question for binary options currency traders is why the sterling is rising against the EUR.

A 4-Horse Race is Underway in France: Casualty #1 is the EUR

Front and centre is the French election. Currency traders and financial analysts are carefully eyeing the opinion polls in the week ahead to see how likely it is that the right-wing party under Le Pen will win the majority in France. The rise of populism in the United States and across Europe is a daunting prospect for markets in that it signifies a break from a collectivist-style mindset in Europe to a nationalist-style mindset.

However, the uncertainty in Europe has undergone yet another dramatic twist, and there are now 4 major contenders for the highest office in France with the rise of Jean-Luc Melenchon. Precisely what the dynamic is in the 4-horse race is unknown. As new contenders jockey for position, it remains to be seen how this will affect the likelihood of a Le Pen win. Owing to this geopolitical uncertainty, the GBP has been rising against the EUR.

Binary Options Trading Advice on the GBPEUR Pair

The GBP/EUR pair will weaken if the contenders weaken Le Pen’s chances of winning. However, if the frontrunners in the election are going to result in a slim majority for Le Pen, the GBP/EUR pair will strengthen. It seems unlikely that the nationalist will scoop the French election victory, but as much was said about Trump’s chances of winning against Democratic rival Hillary Clinton. Media talking heads and political pundits often do not understand the frustrations of the electorate on the ground, and for this reason, financial analysts are keeping an open mind.

The volatility is creating a breeding ground of uncertainty for the EUR and this has resulted in a rising GBP. Consider that in March 2017, the ZEW sentiment survey of 300 financial gurus on the state of the EU economy recorded a figure of 25.6, but in April that figure rose to 26.6. This bodes well for the EUR, albeit a marginal improvement. The ZEW survey was forecast to plunge to 25 in April, and this resulted in a strengthening of the European currency against the greenback.

What’s Going on in the United Kingdom That Will Affect the GBP/EUR Pair?

Currently, the UK Parliament is in recess for the Easter holidays. On Tuesday, 11 April 2017, CPI inflation figures were released for March. Markets anticipated a 2.3% inflation rate, unchanged from the February reading. Given that this is precisely what occurred, the sterling continued on its upward trajectory. Inflation will continue to rise throughout 2017, and we will invariably see the Bank of England tightening monetary policy as the year goes on. According to UniCredit Bank, the average annual inflation rate for the year is forecast at 2.4%.

As inflation rises, so the strength of the GBP improves. The next major economic data release for the UK will take place on April 12 at 9:30 AM – labour market data. The unemployment rate is projected to remain unchanged at 4.7% while those claiming unemployment is expected to drop by 3,000. If the economic data releases exceed expectations, the pound will surge against the EUR. Otherwise, it’s flat trading for the rest of the holiday week.