- Euro Pound and EUR/USD Exchange Rates Drop – Eurozone sentiment remains low
- Pound (GBP) Briefly Relieved on Tuesday – Brexit-linked currency bought from lowest levels
- US Dollar (USD) Sentiment Mixed – Investors concerned about US economic health
- Update: Pound Plummets after Carney Speech – BoE Governor hints at easing
- Forecast: Brexit News to Dominate Movement – Article 50 and central bank reactions in focus
Euro Pound Gains while EUR/USD Slips on Thursday
The Euro Pound exchange rate traded largely flatly for much of Thursday’s session, until a statement from Bank of England (BoE) Governor Mark Carney sent the Pound spiraling lower.
Carney confirmed investor fears when he stated that the central bank would likely introduce new easing policies in the coming months as a result of the Brexit vote. The Euro was also pulled down against the US Dollar which remained sturdy.
Later news that the EU Trade Commission has ruled out trade talks until after the UK has exited the European Union put further pressure on the Pound.
On Friday the Euro Pound currency pair advanced to a high of 0.8371 despite the UK publishing better-than-expected Manufacturing data.
The figures were compiled before the UK referendum and investors expect the measure to fall from its current five-month high in light of the UK’s decision to break from the European Union.
At the time of writing, the Euro to Pound exchange rate had soared to around 0.8349, while the Euro to US Dollar exchange rate slipped to around 1.1110.
Euro Pound Drops, EUR/USD gains on Wednesday
The Euro Pound exchange rate slipped on Wednesday as investors continued to buy the Pound from its worst levels. At the time of writing, EUR/GBP trended in the region of 0.8230.
On the other hand, the Euro to US Dollar exchange rate improved as the US Dollar let off some of its Brexit-induced value.
The Euro’s movement has been mixed due to weak European Union sentiment and falling Eurozone bond yields.
However, some analysts speculate that as the Brexit results’ affect on the global economy has not been as bad as some expected, the European Central Bank (ECB) may choose not to introduce further easing.
Of course, the decision was only announced less than a week ago so the long-term ramifications of the UK’s attempt to detach from the European Union are yet to be known.
Some economists have attributed the Pound’s rebound this week to investor hopes that the person who takes on David Cameron’s post as Prime Minister will decide not to invoke Article 50, although many are asserting that such hopes are misguided.
It has also been announced that Boris Johnson, supporter of the ‘Leave’ campaign and the bookies favourite to become PM, will not be running for the position.
Johnson surprised everybody with his claim that he didn’t feel he could ‘provide the leadership or unity needed.’
(Published 11:03 29/06/2016)
The Euro Pound and EUR/USD exchange rates have seen more muted movements since Tuesday as markets entered a brief period of calm following two sessions of US Dollar bullishness against its European rivals. News that the UK would Brexit from the EU has sent shockwaves across all major currencies.
EUR/GBP’s movement has been especially mixed, but Sterling has attempted to recover slightly, with the pair trending in the region of 0.8260. EUR/USD, on the other hand, recovered on Tuesday as bullish Dollar sentiment waned, with the pair now trading at around 1.1060.
Euro Fluctuates Against Pound as Calmer Markets Readjust
The Pound enjoyed a modest rebound against the Euro slightly on Tuesday as markets took a break from selling off the Brexit-hit Pound in order to buy it from what has been its cheapest levels in years against many majors.
The Euro gained considerably against a plummeting Pound during Friday and Monday trade, but the shared currency itself was left relatively unfavourable due to its close association with Sterling.
As a result, both the Euro and the Pound were bought from cheap levels on Tuesday and they recovered slightly. However, the Pound ended up slightly higher as it had been the most considerably affected by last week’s Brexit result.
According to Bloomberg;
‘Sterling is about to complete its worst quarter in 7 1/2 years, driven down by the UK’s vote to leave the European Union. The Bloomberg British Pound Index, which tracks the currency against seven major peers, has fallen 7.4 percent since March 31, the most since an 18 percent plunge in the final quarter of 2008 following the collapse of Lehman Brothers Holding Inc. in September of that year.’
Movement between the Euro and Pound has remained relatively muted since Sterling’s steep decline as uncertainty takes hold of UK-EU politics. UK MPs look to be attempting to make a deal that will leave the UK enjoying many of its current EU benefits, but many MEPs are unwilling to be cooperative until the UK government incites Article 50 and begins the formal withdrawal process.
As a result of this slight stalemate, as well as ongoing major reforms in the UK’s political parties, markets have had the opportunity to calm.
Euro Recovers Slightly from Lowest Levels against US Dollar
While the Pound suffered most due to its direct relation to the Brexit result, the Euro was weighed down by association and as a result plummeted against the US Dollar on Friday and Thursday.
The US Dollar saw widespread appeal after the Brexit result was announced due to its perceived status as a ‘safe-haven’ currency in forex markets.
Investors rushed to the currency in attempt to protect their assets, selling off currencies most closely impacted by Britain’s decision like the Pound and Euro.
As a result of this however, the Euro hit its lowest levels against the US Dollar since February and recovered slightly on Tuesday as investors bought it from its cheap levels.
US Dollar sentiment also waned slightly after the bullish run towards ‘safe-haven’ currencies wore off. Investors have become concerned about how considerably Brexit and global market movements have affected the previously-recovering US economy.
As a result, traders have readjusted their positions on the US Dollar in anticipation of statements from Federal Reserve Chairwoman Janet Yellen. Investors became even more wary after statements from Fed Governor Jeremy Powell that the Brexit had worsened downside risks.
Euro Pound and EUR/USD Exchange Rates Forecast to Move at Mercy of Brexit
For the near future, major currencies that share a close relationship with the Euro or Pound are likely to be largely influenced by developments in the British ecopolitical landscape, and the Brexit itself.
Huge developments in the Brexit, such as the announcement of a new Conservative Prime Minister, or the incitement of Article 50 (to formally begin the Brexit process), are the events most likely to inspire currency movement.
Speculation is rife as to when Article 50 will even be activated. The UK government has stated it will not invoke Article 50 until a new Conservative Prime Minister is in power (in September or October).
Leaders in other EU nations have urged the UK to not put it off longer than needed however, as the uncertainty is damaging the EU’s wider economy.
Markets are also likely to keep a close eye on the world’s central banks, with the European Central Bank (ECB), Bank of England (BoE) and Federal Reserve set to be major players in terms of staving off potential Brexit damage to the global economy.
The Euro and Pound are likely to remain pressured for an extended period of time due to uncertainty throughout the Union and Euroscepticism rising in other EU nations.
The US Dollar will continue to see favour as a ‘safe-haven’, but could easily drop against its rivals if the Federal Reserve confirms fears that this year’s interest rate hike forecasts have been cut once more.
At the time of writing, the Euro Pound exchange rate (EUR/GBP) trended in the region of 0.8260, while the Euro US Dollar exchange rate (EUR/USD) traded at around 1.1060.
