- EUR GBP Exchange Rate Fluctuates Amid Uncertainty – ECB ‘Ready to provide additional liquidity
- Pound Sterling (GBP) Dives – UK vote for Brexit shocks markets
- EUR GBP Exchange Rate Forecast – Market sentiment and uncertainty to dictate movement
- Domestic Data to have a Reduced Impact – Trader focus to be dominated by geopolitical developments
EUR GBP Exchange Rate Holding Gains, GBP EUR 11 Cents Lower Following Referendum
Although the rate of Pound losses appears to have slowed for now, the EUR GBP exchange rate remains trending in the region of 0.83 – a multi-year high.
The Pound Euro exchange rate, meanwhile, is 11 cents lower than it was before the results of the referendum were announced.
Any concerning announcements could send Sterling reeling again today while indications that the UK government is forging a workable plan for dealing with the fallout would be Pound supportive.
While the Euro has lost a little ground against Sterling today, the EUR/USD exchange rate has strengthened, achieving a high of 1.1080.
(Previously updated 27/06/2016)
Markets Reopen After Brexit, EUR GBP Exchange Rate Pushes Higher
After plummeting by as much as 10% on Friday, the Pound extended losses against its major rivals when markets reopened after the weekend – with the EUR GBP exchange rate advancing a further 1.65% to hit a high of 0.8264.
With the UK government in turmoil and uncertainty over the nation’s next steps rising, the Pound is likely to remain on this downtrend in the short to medium term.
The Pound Euro exchange rate has spiraled all the way to a multi-year low of 1.19. Some investors are expecting the pairing to reach parity by the end of the year, though the Pound could steady if it looks as though the government has a solid plan for coping with the UK exit.
TorFX currency analyst Josh Ferry Woodard noted; ‘The supreme uncertainty caused by the referendum result means that traders will likely be reluctant to send the Pound higher anytime soon. So although GBP/EUR is currently at a two-year low, it could well weaken further during this week’s session.’
Data releases are unlikely to have much impact on the Euro Pound exchange rate with attention so wholly focused on the slightly surprising result of the UK’s EU referendum.
(Previously updated 26/06/2016)
At the close of last week the British Pound held considerable losses as traders reacted to the unexpected news that the UK voted to leave the European Union, with EUR GBP exchange rates holding gains. The depreciation was larger-than-anticipated given that traders had priced-in a ‘Remain’ victory ahead of the result.
The Euro also suffered heavy losses, but held gains against Sterling. The Euro’s depreciation can be linked to uncertainty as to how a Brexit will impact the EU. Concerns that other European nations may now push for their own referendums on EU membership are growing. If such a movement concerns, the whole institution could be undone. Additionally, European Central Bank (ECB) President Mario Draghi has already asserted that the central bank will intervene if necessary.
EUR GBP Exchange Rate Rallied but Falling Bond Yields May Cause Marked Euro Losses
Whilst most traders forecast a sharp Sterling depreciation in the event of a Brexit, few thought it would actually transpire. Misplaced confidence saw Sterling climb speedily before votes were counted and verified. The resultant depreciation was therefore steeper-than-anticipated, although consolidative trade saw Sterling edge higher from intraday lows.
The Euro also suffered in the wake of the UK’s Brexit vote. Several analysts predict that the Euro will see longer-term damage given the ripples of contagion and growing disillusionment amongst EU member states.
Also weighing on EUR exchange rate outlook is the ECB’s announcement that the institution is ready to provide banks with cash if necessary. Furthermore, demand for safe-haven assets caused sovereign debt to rise, with yields declining in response. This could have a damaging impact on the ECB’s asset purchase programme, especially with available bonds already limited.
‘The ECB stands ready to provide additional liquidity, if needed, in Euro and foreign currencies,’ the Frankfurt-based institution said. It is ‘closely monitoring financial markets and is in close contact with other central banks.’
EUR GBP Currency Outlook: Will Domestic Data be Impactful?
Whilst the coming week will see several, ordinarily influential, domestic data publications there is a high chance ecostats will have a limited impact on the EUR GBP exchange rate.
One of the major reasons British and European data will be less impactful is that the results are somewhat obsolete before they have been published. All the data will reflect a UK and Europe that was together, so fresh data is likely to deviate significantly.
With that in mind, the figures from Gross Domestic Product and inflation data will largely be ignored by investors.
It is likely to be a similar story with Germany’s Consumer Price Index, although results here may not be as highly impacted by a Brexit. Eurozone Consumer Prices, however, will probably produce an obsolete result.
EUR GBP Exchange Rate Forecast to Cool on ECB Uncertainty
Given that traders will be highly likely to buy back in to Sterling by taking advantage of its low trade weighting, and with so much uncertainty regarding the impact of Brexit on the EU and the Eurozone, the EUR GBP exchange rate may well cool from Friday’s highs.
With the ECB likely to have to ease policy further with asset purchases having a muted impact amid rallying bond prices, demand for the single currency could fall considerably.
Although domestic data is predicted to have a muted impact, the EUR GBP exchange rate will still see volatility in response to market sentiment and domestic and geopolitical developments.
During Friday’s European session, the EUR GBP exchange rate saw massive price swings within the range of 0.7729 to 0.8315.