- Flash Crash Kicks Pound (GBP) when it’s Down – Adds to ‘Brexit’ woes.
- Hollande Takes Tough Stance on ‘Brexit’ – Warns that the UK must pay the price for leaving the EU.
- Deutsche Bank Shares Drop 4% – Investors still unsure about how much fine will be.
- Pound Predicted to Reach Parity with Euro – Expected to happen by the end of 2017.
The GBP EUR exchange rate hit a six-year low last Friday following the Pound’s flash crash, but the currency has remained volatile since the week’s session opened as investors are still uncertain over the Deutsche Bank fine.
Pound (GBP) Plummets Following Flash Crash
The Pound was dealt a major blow last week as a mysterious flash crash hit the currency overnight in the Asian market. Analysts are still not sure what caused the crash but speculate that is was either an automated trading error or a ‘fat fingered’ trade.
It came at the end of what had already been a difficult week for the Pound as it struggled in the wake of Prime Minister Theresa May’s assertions that she would seek to begin formal ‘Brexit’ negotiations by the end of March 2017.
Market sentiment following this announcement caused the value of Sterling to plummet as investors worried about the possibility of a ‘hard Brexit’ and what impact it would have on the UK economy.
Sterling Suffers as Hollande Stands Firm Ahead of ‘Brexit’ Negotiations
French President François Hollande took an aggressive stance over ‘Brexit’ as he spoke at the Jacques Delors Institute in Paris last Thursday as he told them that ‘there must be a threat, a risk, a price’ to the UK leaving. He continued by saying;
‘Britain decided to go for a Brexit, in fact I believe a hard Brexit. Well, we have to follow through with Britain’s wishes to leave the European Union and we have to be firm. If not we will put into question the EU’s principles’
There is speculation that it was Hollande’s speech that may have caused automated traders to dump the Pound in last week’s flash crash, but regardless it caused the Pound to drop as traders see this as confirmation that the UK will not retain access to the single market.
Euro (EUR) Sinks amid Fresh Deutsche Bank Anxiety
Deutsche Bank shares have dropped around 4% today over fresh concerns about a $14billion fine levied against it by the US Department of Justice for mis-selling mortgage bonds a decade ago.
The renewed fears come as Germany’s largest newspaper, Bild am Sonntag reports that Deutsche Bank CEO John Cryan was unable to secure a reduction in the fine last week while in Washington for a meeting of the International Monetary Fund.
As a major player in the EU’s largest economy, the possibility that Deutsche Bank may be unable to pay the full fine has caused the Euro to slide.
GBP EUR Exchange Rate to Reach Parity with EUR?
Previous predictions that the Pound could reach parity with the Euro by the end of 2017 may have been generous following the dramatic crash last Friday, with some airports already starting to offer rates that see the Pound worth less than the Euro.
Although currency firms trading in airports are known for offering terrible rates, with the current trend it may not be too long before the interbank rates hit this point, especially following yet more positive Eurozone Data today.
Current Interbank Exchange Rate
At the time of writing the GBP/EUR exchange rate was trending around 1.10 and the EUR/GBP exchange rate was trending around 0.90.