UPDATE
The Pound Sterling to Euro (GBP/EUR) exchange rate edged higher by around 0.2% on Friday afternoon.
After it transpired that Chinba are willing to back the UK’s ‘Northern Powerhouse’ scheme, the Pound rallied versus its major peers. As President XI Jinping’s economic state visit comes to a close, there are expectations of Chinese funding into British education and a direct flight between Manchester and China.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3911.
Earlier…
GBP/EUR Exchange Rate Predicted to Hold Losses after RBS Suggested Safe-Guarding against Brexit
The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.4% on Friday morning.
With a complete absence of domestic data on Friday, the Pound fluctuated versus its major peers. Although holding a comparatively strong position following yesterday’s positive result from British retail sales data, the Pound erred towards depreciation today following a warning from the Royal Bank of Scotland (RBS). Analysts at RBS warned that it would be wise to take measures now to safe-guard against a Brexit in 2017. This is a step up from a number of banks which have issued statements warning customers to keep a close eye on developments.
‘We want to make sure we’re ahead of the curve on it,’ said Andrew Roberts, head of European rates strategy at RBS in London. ‘We should be looking to see now if there are trades that can be entered into to take advantage of this not being too much on radar screens yet.’ The Pound’s depreciation suggests traders fear that RBS believe that the UK will leave the European Union in 2017. However, an RBS official wished to divert that sentiment, stating; ‘RBS is not expressing any opinion whether Brexit is likely or not, we are just saying that the referendum isn’t the centre of attention yet,’ said Mary-Dauphin. ‘That’s why we suggest early insurance trades.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3829.
EUR/GBP Conversion Rate Forecast to Hold Gains despite Dovish ECB
Yesterday saw the Euro dive across the board after European Central Bank (ECB) President Mario Draghi presented a dovish policy outlook and hinted at the prospect of further cuts to the overnight cash rate and an expansion of the quantitative easing program. Such was the depreciation that many analysts did not expect today’s domestic data to have a significant impact. However, better-than-expected results allowed the shared currency to halt losses.
The French and Eurozone Manufacturing, Services and Composite PMIs all bettered the respective median market forecasts. German Services and Composite data also eclipsed expectations, although the Manufacturing PMI dropped below the market consensus. Commenting on the flash Eurozone PMI data, Chris Williamson, Chief Economist at Markit said; ‘The PMI brings welcome news that the Eurozone economy picked up some momentum in October. With new business growing at the fastest rate for six months, firms were encouraged to boost staffing levels again.’
The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3816 today.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Losses on Brexit Concerns
Although the planned 2017 referendum on Britain’s membership to the European Union seems far off, many banks are already hinting that it would be wise to prepare for the event of a Brexit. With an absence of data to provoke upward momentum, the Pound is likely to hold losses versus the Euro. However, the GBP/EUR exchange rate could recover slightly if US data provides a positive result and the Euro declines in the face of a ‘Greenback’ (USD) uptrend.
In the long-term, the prospect of looser policy from the ECB is likely to weigh on demand for the common currency.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.3888 during Friday’s European session.