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ECB Policy Caution Fails to Prevent EUR/GBP Rate Rise

The Euro has risen further against a battered Pound today, thanks to high trader disappointment around Brexit.

The EUR/GBP exchange rate opened in the region of 0.8798 on Friday morning and has since risen to the area of 0.8836.

For the weakened Pound, the main issue has been the timing of Brexit.

In an eleventh-hour announcement, the UK was finally granted permission to discuss trade and transitions in 2018.

Unfortunately, the UK negotiating team only has from March to October to cement a trade agreement, after which time EU officials will start ratifying the terms of Brexit.

(First published December 15th, 2017)

The Euro has made clear gains against the Pound today, despite a disappointing trade balance reading.

  • EUR GBP rate rises to 0.8798 – GBP EUR rate dips to 1.1372
  • Euro advances despite ECB caution – Central bank warns of contingency measures
  • Pound slips ahead of EU summit announcement – Traders tense over odds of UK approval
  • Euro may rise further on inflation stats – Will Pound rally on EU summit result?

The Pound has struggled in trading today, owing to high uncertainties about an imminent announcement from EU leaders.

Euro to Pound Rate Rise Seen after Mixed ECB Policy Meeting

The Euro has made a minor rise against the Pound today, following a relatively cautious European Central Bank (ECB) policy announcement on Thursday.

The ECB left interest rates at 0% for another month, which was the expected outcome.

In a boilerplate response, the ECB statement on monetary policy read;

‘At today’s meeting the Governing Council decided that the interest rate on the main refinancing operations will remain unchanged at 0%.

The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases’.

Slamming the brakes on any reports of hawkish behaviour, the ECB restated that if the ‘outlook becomes less favourable’, the bank;

‘Stands ready to increase the asset purchase program in terms of size and/or duration’.

Despite this warning, however, ECB estimates for inflation and GDP growth in the coming years were upgraded slightly.

In other Eurozone news, the trade balance for October has declined from €26.2bn to €18.69bn, a fact largely ignored by still-confident traders.

GBP/EUR Rate Drops before Crucial EU Announcement

The Pound has made minor losses against the Euro today, in the lull before an extraordinarily important announcement from the EU.

This will be the conclusion of EU leader discussions about Brexit, which could result in the UK moving onto ‘phase two’ of negotiations.

This would open the door to the discussion of post-Brexit trade in 2018, something long sought by UK negotiating teams.

EUR/GBP Exchange Rate could Rise on Upcoming Inflation Stats

Next week’s first Eurozone data will come on Monday, consisting of inflation rate stats for November.

Finalised annual inflation is tipped to rise from 1.4% to 1.5%, which could push up demand for the Euro.

More immediately, the Pound is likely to turn turbulent when today’s EU summit result is announced; analysts are widely forecasting a positive result for the UK.

That said, if EU leaders unexpectedly deny UK progression in Brexit talks then the Pound could plummet in value.

Current Interbank EUR GBP Exchange Rates

At the time of writing, the Euro to Pound (EUR GBP) exchange rate was trading at 0.8798 and the Pound to Euro (GBP EUR) exchange rate was trading at 1.1372.