- Pound Sterling (GBP) Exchange Rates Struggle – BoE’s Carney earned of rate cuts
- Euro (EUR) Exchange Rates Edge Higher – Eurozone inflation unexpectdly rose
- Pound Euro Exchange Rate Forecast to Hold Losses Today – Political division to weigh on investor confidence
- UK Data Unlikely to be Impactful – GBP data refers to a pre-Brexit Britain
Pound Euro Exchange Rate Dived following Carney Speech
After Bank of England (BoE) Governor Mark Carney strongly hinted that policy easing is likely to occur in the coming months, the Pound resumed bearish trade. However, Carney also made it clear that there will only be so many cuts as stimulus measures are having an increasingly soft impact.
On Friday morning, the Pound Euro exchange rate declined by around -0.5% to trend in the region of 1.1947. Unless there is a major political development with regards to the EU-UK relationship going forward, the Pound is likely to hold losses.
The British currency failed to benefit from a better-than-forecast UK manufacturing PMI result as the European session progressed. Although the measure achieved a 5-month high, the fact that the data was collated before the referendum meant its impact was minimal. Domestic data is unlikely to have a significant impact for some time to come on this basis, although next weeks BoE Financial Stability Report is likely to provoke volatility.
(Previously Updated June 30, 2016 @ 17:03)
Pound Euro Exchange Rate Ticks Higher ahead of BoE’s Carney Speech
Despite the atmosphere of uncertainty penetrating the British political landscape, the Pound Euro exchange rate edged higher by around 0.1% on Thursday afternoon.
This is partly due to a continued relief rally, but also thanks to hopes that the Bank of England (BoE) will continue to be effective in stabilising markets. The Euro managed to claw back some of its losses, however, as pre-brexit inflation improved across the Eurozone.
Since the fallout from the UK’s vote to Brexit caused the Pound to fall to multi-year lows versus its peers, a relief rally has seen Sterling claw back some of its losses.
In addition, the FTSE 100 has nearly recovered completely, indicating that traders are more confident that the UK will be able to agree to a beneficial trade deal with the EU.
However, the domestic political landscape is in chaos. The Tory Party are looking to elect a replacement for David Cameron, whilst the Labour Party had an overwhelming vote of no confidence in party leader Jeremy Corbyn.
Meanwhile the UK is no closer to triggering Article 50 of the Lisbon Treaty and the general atmosphere of uncertainty is predicted to cause the Pound to resume depreciation.
Another reason many predict a return to GBP bearishness are concerns that the British consumer will rein in spending while there is uncertainty regarding the economic future, which could see a massive loss in British growth.
‘Consumer confidence has collapsed since the vote,’ YouGov’s Stephen Harmston said in a statement. ‘Four days of uncertainty has wiped out the gains made over the last three years. It has not yet reached the depths of the financial crisis in 2008 but we expect it to decline further as some of the consequences of Brexit kick in.’
Later today, Bank of England (BoE) Governor Mark Carney is due to make a speech. Traders will be hanging on to every word in the hopes of reassurance that the central bank can act to stabilise markets.
Pound Euro Exchange Rate Strengthened amid Fears of Brexit Contagion
The Euro softened versus a number of its major peers on Thursday as European stocks and crude oil declined for the first time in three days.
All the while risk-appetite drove currency movement, the Euro avoided large losses as bond yields improved. However, many analysts believe the improved market sentiment is transitory.
‘It would be premature to suggest the recovery in risk sentiment has solid legs,’ said Rodrigo Catril, of National Australia Bank Ltd. ‘Post-Brexit, the expectations of a lower-for-longer yield environment and the UK political vacuum until September are providing a sense of calm and they are providing an uplift to risk assets. So risk appetite is reappearing, but only cautiously.’
In addition to concerns of a return to higher bond prices, which would limit the impact of the European Central Bank’s (ECB) asset purchase programme, the Euro is struggling amid concerns that the Brexit vote will be a catalyst for other member states to trigger referendums.
The rise of the populist parties throughout Europe is a very clear indication that opposition to the current EU format is becoming increasingly pronounced in member states.
‘The British are not the only ones with doubts about the European Union,’ said Pew Research’s Bruce Stokes. ‘The EU is again experiencing a sharp dip in public support in a number of its largest member states.’
Pound Euro Exchange Rate Forecast: Will Carney Speech Ease Concerns?
Prior to the UK’s decision to Brexit, BoE Governor Mark Carney was vocal on the detrimental impact leaving the EU would have on the British economy. Now that the UK has voted to leave, however, investors are hoping he can settle markets.
Meanwhile, the Euro is likely to continue to struggle in the short-term while there is uncertainty regarding the UK-EU relationship. Additionally, if populist parties gain more power in member states the Euro is likely to extend losses.
The Pound Euro exchange rate was trending within the range of 1.2044 to 1.2130 during Thursday’s European session.
