- Pound Recovery Short Lived – Officials confirm that there will be no vote on ‘Brexit’ Strategy.
- ECB Unlikely to alter Monetary Policy – Mersch speaks on inflation targets.
- UK House Price Data Better than Expected – Provides slight boost for GBP exchange rates
- Friday to Provide little Data – EUR GBP movement may be limited
The EUR GBP exchange rate recovered by around 0.5% today after falling below 0.90 yesterday. The Pound’s (GBP) bounce on Wednesday was scuppered when it was confirmed that British MPs would have no power to change the government’s approach to ‘Brexit’ despite being granted a debate on the matter.
Pound Sterling (GBP) Slumps as ‘Brexit’ Vote Denied
The Pound spiked on Wednesday morning following the news that UK Prime Minister Theresa May would be granting a concession to the opposition and would allow British MPs to have a parliamentary debate on ‘Brexit’ ahead of the government’s triggering of Article 50 of the Lisbon Treaty early next year.
However Sterling’s recovery proved to be premature as it was confirmed later in the day that there would be no official vote on the terms of the UK leaving the EU and that the government would have the final say on ‘Brexit’ negotiations.
This has renewed investor fears that the UK might head towards a ‘ hard Brexit’ possibly losing access to the single market as it seeks greater immigrations controls. This was exacerbated by comments from ‘Brexit’ secretary David Davis who said that it was ‘not black or white’ in regards to the UK staying in the single market.
ECB Rejects Raising Inflation Targets, EUR Fluctuates
Meanwhile, the Euro Pound (EUR GBP) exchange rate also fluctuated in response to news from the Eurozone.
European Central Bank (ECB) board member Yves Mersch spoke at Harvard University yesterday dismissing unproven ideas to raise inflation targets in order to get prices moving higher saying;
‘At a time when inflation is low everywhere, and when central banks are running very accommodative monetary policies just to achieve that, one can question whether such signals would really be credible. I see a risk, in fact, that changing our strategy to rely on fuzzy concepts and unobservables would only end up damaging our credibility.’
The Euro was strengthened following his speech as it alleviated any fears that the ECB may adopt unorthodox monetary policies following the recent German banks crisis.
GBP EUR Gains Slightly Following Positive House Price Data
The Pound was able to apply some pressure on the Euro (GBP EUR) this morning following a positive report from today’s RICS house price balance data. Prices rose to 17% beating analyst expectations of 14% and providing a much needed boost for Sterling.
The German consumer price Index failed to produce a similar effect for the Euro as it remained unchanged from the previous month’s report at 0.1%.
EUR GBP Exchange Rate Forecast: Pound to Trade Flatly Against the Euro for the Rest of the Week?
With a lack of significant data tomorrow traders will be looking to next week’s data to gauge movement. With consumer price index reports due for both the UK and Eurozone early in the week there should be plenty of data for markets to move on.
The ECB rate decision on Thursday will also be a focus point for investors. While the ECB is not expected to raise interest rates from their current ultra-low levels the markets will be looking for some confirmation or denial of recent rumours that the ECB is looking to taper its quantitative easing programme.
Current Interbank Exchange Rates
At the time of writing the EUR/GBP exchange rate was trending around 0.90 and the GBP/EUR exchange rate was trending around 1.10.