- Market Optimism Dulls in Face of a Brexit EUR/GBP Exchange Rate Firms – The Pound’s miraculous rally has subsided somewhat.
- ECB’s Mario Draghi Assures EU Banks are Prepared for Either Result – Extra liquidity and emergency policies at the ready.
- Latest Brexit Polls Show Vote is Too Close to Call – Latest surveys show a 45/44 split in favour of remain.
- Forecast: Fate of the Pound sits on the Shoulders of UK Voters – Analysts, investors and economists all agree that Pound will see massive losses in the event of Brexit.
The EUR/GBP exchange rate has seen a steady decline since last week’s saddening events, but the pairing edged slightly higher on Thursday as the UK public took to the polls to vote in the hotly anticipated EU referendum.
After the tragic murder of Jo Cox coincided with the ‘Remain’ camp gaining momentum, pro-EU sentiment has only increased in the UK and it has taken the Pound along with it. Suspended campaigning over the weekend allowed the bubbling ‘Remain’ movement to prosper in the absence of intervention from the ‘Leave’ campaign.
As a result the Euro depreciated significantly against the Pound, but promising European bonds seemed to have stemmed any more drastic movement, with the Euro gaining marginally over the course of yesterday.
Euro (EUR) Bolstered by Central Bankers and Promise of Delayed Fed Rate Hike
It has been a steady slide for the EUR/GBP exchange rate since the Pound gathered its strength thanks to waning Brexit concerns.
Opening from the weekend, the Euro traded at 0.78 Pounds but sharply fell and has continued its fall over the rest of the week so far, barring yesterday’s slight rebound and a decent spike on Tuesday. Tuesday’s spike seems to be, in part, due to some incredibly flattering European economic sentiment surveys and an increase in borrowing for the UK Government that stands in great contrast compared to last month.
Head of the European Central Bank Mario Draghi gave a speech on Tuesday afternoon to placate investors and such with the news that European banks should be more than equipped to deal with either result come Friday morning. While easing fears of liquidity turmoil post-referendum, Draghi’s comments also made it very clear the ECB believe a Brexit is a distinct possibility.
With the Fed maintaining that a rate hike still sits much further into the future, investors may continue to eye up the common currency.
EUR/GBP Exchange Rate Firms as Pound’s Meteoric Rally Relents in Face of Closer Poll Results
Yesterday saw the Pound depreciate ever-so-slightly against the majors as the latest polls suggest the vote may be too close to call, even if perceived sentiment seems to sit towards ‘Remain’.
This small dip could also be a fractional rebound as the Pound previously saw incredibly large single-day rallies against almost all its pairings and investors turned to take advantage of lucrative selling positions ahead of whatever result tomorrow morning holds.
Previously the Pound was enjoying a massive surge as pro-EU sentiment has been at an all-time high in the run up to the vote. This falls in line with research that states undecided voters tend to stick with the status quo as the date of any referendum draws near. Polls were also mirroring this at the start of the week but the most recent show a 45/44 split favouring ‘Remain’.
EU Referendum Driving EUR/GBP Exchange Rate as UK Public goes to Vote
Thursday is bursting with Eurozone sector PMIs and more European data is set for release on Friday in the form of German business sentiment surveys. Even though both sets of data could be fairly influential, there is a great chance it will all be ignored or unnoticed as the financial world looks towards Britain and their European Union membership vote.
Exit polls on Thursday may offer us a cursory glimpse at the result but we will have to wait until Friday morning for the genuine figures. At a glance you could expect the Pound to garner substantial strength if the result is ‘Remain’. Conversely, in the event of a Brexit, some analyst are positing we could see as much as a 20% drop in value for Sterling.
Other factors will have to take the side-lines as the UK voting public takes centre stage, holding the future of the British currency in their hands. How the EUR/GBP exchange rate will perform remains to be seen.