Low Confidence over Brexit Outcomes Enables EUR/GBP Exchange Rate Rise
The Euro (EUR) has appreciated against the Pound (GBP) today, rising by 0.4% in the pairing.
This appreciation is mainly down to Sterling weakness, given the limited Eurozone data out so far today.
GBP traders have panicked after comments made by Bank of England (BoE) Governor Mark Carney, who warned about the consequences of a ‘no deal’ Brexit.
Today’s Eurozone news has been low-impact Italian industrial data, which has shown a slowdown in annual orders but growth in monthly sales and orders.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Tumbles after BoE Governor’s Brexit Warning
The Pound (GBP) has fallen by -0.4% against the Euro (EUR) today, in the wake of GBP-damaging remarks from Bank of England (BoE) Governor Mark Carney.
Mr Carney spoke on the importance of securing a favourable Brexit agreement with the EU, warning that if there was no deal then:
‘It would be a material event. I wouldn’t prejudge in which direction, though.
‘Speaking very narrowly about the financial services side, in the event of a no-deal scenario… there would be big economic consequences. We might have a lot of idle bankers as there is not a lot of demand for their services.
‘We are concerned that the EU has not yet indicated its solution. The private sector cannot solve these issues.
‘This is fundamentally about taking responsibility to protect the financial system… its cold comfort, but it will be worse in Europe than it is here.’
The UK financial sector is seen as at-risk from no Brexit deal, because companies could migrate to mainland Europe if they are worried about post-Brexit conditions.
Euro to Pound Sterling Exchange Rate Forecast: Are EUR/GBP Exchange Rate Losses ahead on UK Wage Growth Data?
The Euro (EUR) is at risk of falling back against the Pound (GBP) in the near-future, when UK inflation rate data comes out on Wednesday morning.
These ecostats will cover year-on-year and month-on-month changes to inflation during June and are predicted to show a higher annual rate of price growth.
Such a result could either boost or worsen the GBP/EUR exchange rate, depending on how currency traders react to the news.
In Sterling’s favour, traders might see higher inflation as another reason for the Bank of England (BoE) to raise interest rates at their August policy meeting.
On the other hand, GBP might be weakened by concerns that higher inflation will put pressure on UK households without ensuring a BoE interest rate hike.
Looking beyond Wednesday’s UK’s inflation rate offering, finalised Eurozone inflation rate figures will be out slightly later in the morning.
These ecostats might erase any GBP/EUR gains and cause a Euro rally, should they confirm that annual inflation rose to 2% in June.
A forecast-matching rise in the pace of price growth would put inflation right on the European Central Bank’s (ECB) target.
An ECB interest rate hike is not expected until 2019 at the earliest, but higher inflation could force a rate hike at an earlier date than first predicted.