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Euro Pound Sterling (EUR GBP) Soars to Highest Levels Since 2008

  • Euro Pound Sterling Climbs to 0.9210 – Pound Sterling Euro slides to 1.0856
  • Eurozone Markit PMI’s Prove Positive – Euro bolstered
  • UK Expected to Soften Brexit Stance – Confusion reigns regarding EU court influence

The Euro Pound Sterling exchange rate climbed to its highest levels since 2008 this morning after some positive Eurozone data prints and news that Wednesday’s ‘Brexit Papers’ may reveal a concession regarding the UK’s stance on Brexit.

August’s Eurozone Markit Manufacturing PMI printed at 57.4, up from July’s 56.6 and indeed beating the forecast of 56.4. The composite figure as a whole also printed higher, coming in at 55.8, up from July’s 55.7 and the forecast of 55.5.

Investors bought into the Euro as a result, seemingly unperturbed by the recent speech from European Central Bank (ECB) President Mario Draghi, who took the opportunity to defend policymakers’ use of quantitative easing (QE).

GBP Stumbles as Brexit Paper Reveals European Courts Could Retain Influence

Sterling sharply fell this morning after news that the latest Brexit policy paper (the third out of five) could allow the European Court of Justice (ECJ) to maintain a degree of influence over UK law after Brexit has taken place.

The paper does, however, repeat the government’s insistence in attaining ‘direct jurisdiction’ over its courts; the primary point of contention is that it sets out various options in regards to resolving future disputes between the two nations.

The perception of this news has varied throughout this morning, with a great deal of speculation and argument resulting from the use of the word ‘direct’ in regards to the degree of jurisdiction that the ECJ will hold.

Justice Minister Dominic Raab soon doused the flames of conjecture, however, asserting that it simply meant that both the UK and the EU judges would maintain ‘half an eye’ on what the other is doing.

A Government Spokesperson also stated:

‘It is also in everyone’s interest that, where disputes arise between the UK and the EU on the application or interpretation of these obligations, those disputes can be resolved efficiently and effectively.’

This news appeared to steady the Pound’s descent, though there remain concerns that the UK will be conceding its position regarding the role of the ECJ after Brexit.

Euro Pound Sterling (EUR GBP) Forecast: Jackson Hole Liable to Cause Further Volatility

Whilst the Euro remains soaring at almost 10-year highs against the Pound, further volatility is forecast in the build-up and aftermath of Friday’s Jackson Hole symposium.

ECB President Mario Draghi will take to the stage at said event to discuss the direction of the single currency, along with his Federal Reserve counterpart Janet Yellen (who will be discussing the US Dollar).

Economists remain somewhat divided on what the possible outcomes for said event will be, especially with Draghi’s speech today both defending the use of QE (perhaps demonstrating sentiment that its continued use is warranted), and talking of its success (possibly suggesting that its job is done).

Draghi stated:

‘A large body of empirical research has substantiated the success of these policies in supporting the economy and inflation, both in the euro area and in the United States … Policy actions undertaken in the last 10 years in monetary policy and in regulation and supervision have made the world more resilient. But we should continue preparing for new challenges’.

Draghi may very well simply not mention QE, instead choosing to stick to the theme of the event.

Indeed, recent comments that the rising price of the Euro in turn stifles inflation for the Eurozone, add some credence to the suggestion that Draghi may be hesitant to provide a hawkish message – instead seeking to the keep the Euro low so inflation has a chance to increase.

Whatever Draghi chooses to do, volatility for this pairing is likely.

There remains no data that could influence Pound Sterling today, but markets will be waiting with baited breath for tomorrow’s UK 2nd estimate gross domestic product figures, which are currently predicted to remain steady quarter-on-quarter at 0.3% and year-on-year at 1.7%.

Slight deviations in either direction will be liable to push EUR GBP up or down, though if the expectation materialises then Sterling might see a small boost.