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EUR GBP Exchange Rate Stable Ahead of ECB Meeting, Euro Volatility Forecast

  • EUR GBP Exchange Rate Fluctuates as Hammond Speaks – Attempts to ease concerns over a ‘hard Brexit’.
  • ECB Meeting Today – Speculation causes Euro (EUR) Volatility.
  • UK Retail Sales Fall Short – Disappointing data may cause drop in Pound Sterling.
  • EUR GBP Forecast – Pound to remain chained to market sentiment over ‘Brexit’.

The EUR GBP exchange rate has remained around 0.89 since a drop on Tuesday following a High Court ruling in the UK that may allow British MPs to vote on how the UK splits from the EU.

Euro (EUR) Fails to Pressure Pound (GBP) as Chancellor Strikes Softer Tone on ‘Brexit’

The EUR GBP exchange rate was unable to push higher yesterday, as the Pound remains at its highest point since the Sterling flash crash earlier in the month. This was partly thanks to UK Chancellor Philip Hammond who struck a softer tone towards ‘Brexit’.

When speaking at a parliamentary committee yesterday he said;

‘As we approach the challenge of getting net migration figures down to the tens of thousands it is, in my view, essential that we look at how we do this in a way that protects our economy and protects the vital interests of our economy.’

His approach for softer immigration in exchange for greater access to the single market contradicts many of his more vocal ‘Brexit’ colleagues and have caused some tensions in the British cabinet in the past week.

Investors, however, welcomed the news as they fear the uncertainty that surrounds Britain losing access to free trade with the continent, helping the Pound to rebuff any advances from the Euro.

ECB Speculation Causes Some Volatility in the Euro Pound Exchange Rate

The European Central Bank (ECB) is set to convene for October’s monetary policy meeting later today and ongoing speculation over whether it will continue with its stimulus programme is causing some fluctuations in the EUR GBP exchange rate.

As inflation in the Eurozone has begun to creep higher, some investors have started to speculate that ECB President Mario Draghi may hint at an early tapering of the bank’s quantitative easing programme – which is currently scheduled to end in March 2017.

This approach would be favoured by many European banks, especially those in Germany as they struggle with the ECB’s aggressively low rate policy. Any signals that the central bank would be willing to raise rate would prove to be a boon for the Euro.

However a number of analysts believe that Draghi may actually seek an extension to the current QE programme to ensure that inflation continues to grow and to give the ECB some flexibly to react to any dips in the economy.

Disappointing UK Retail Data Causes Slight Downtrend in Pound (GBP)

Pound (GBP) exchange rates softened after the release of today’s retail sales report from the UK proved to be disappointing to many investors, following positive inflation and employment data earlier in the week.

Retail sales only rose to 0.0% from -0.3% in September, falling short of forecasts for 0.2%. While the data wasn’t terrible, investors are likely to be worried that the UK economy is growing slower than expected.

EUR GBP Exchange Rate Forecast: ‘Brexit’ Sentiment to Remain Driving Factor behind Currency Pair

With the ECB largely expected to vote to keep its current monetary policy unchanged, traders will be looking towards tomorrow’s data as they attempt to gauge any future movements in the EUR GBP exchange rate.

Tomorrow’s report on UK public sector spending may cause a small boost for the Pound as the deficit is predicted to drop slightly, but market sentiment will most likely be beholden to any reports on ‘Brexit’ as Sterling becomes an increasingly politicised currency.

Current Interbank Exchange Rates

At the time of writing the EUR GBP exchange rate was trending around 0.89 and the GBP EUR exchange rate was trending around 1.11.