- Pound Euro Exchange Rate Trades Flatly on Monday – Sentiment towards EU currencies weak
- Sterling (GBP) Slips on Monday – Euro also remains weak despite positive data
- Update: Sterling Drops on BoE News– Carney states Brexit warnings coming true
- Forecast: Conservative Leadership Contest Ongoing – Expected to develop on Thursday night
Pound Euro Exchange Rate Extends Losses on Wednesday
After a session of solid losses on Tuesday, the Pound Euro exchange rate initially held its ground at levels around 1.17 for much of Wednesday as markets watched the debates surrounding the Chilcot Reports.
However, GBP/EUR eventually extended its losses in the late afternoon after yet another property fund company, Henderson, suspended asset withdrawal in order to prevent devaluation.
Four major property fund firms have suspended withdrawals this week in order to prevent investors from mass-withdrawing assets from them in Brexit-related panic trades. As a result, investors have been leaving other UK assets, such as the Pound itself, en masse in order to protect their assets.
Further Pound losses are expected and analysts have forecast that GBP/EUR could slide to parity before the end of the year. The GBP/USD exchange rate has also posted additional losses, with the pairing falling as low as 1.27.
At the time of writing, GBP/EUR was trending in the region of 1.1650.
(Previously update 14:17 06/07/2016)
GBP EUR Holding 1.17, Further Losses Forecast?
After plummeting on Tuesday in response to market’s latest reaction to the UK Brexit, the Pound Euro exchange rate was holding a multi-year low of 1.17 on Tuesday.
With no positive UK news to send the Pound higher and the Euro under some pressure as a result of sub-par domestic data, the pairing may continue in this range for the rest of the European session.
One of the less-than-impressive reports to emerge from the Eurozone today was Germany’s Factory Orders figures. Orders were shown to have printed at 0.0% on the month in May and fallen by -0.2% on the year.
(Previously updated 05/07/2016)
Pound Euro Exchange Rate Plummets 1% on Tuesday
The Pound Euro exchange rate fell throughout Tuesday’s session, but headed away from its worst levels of 1.1709 and closer to 1.1750 as the session drew to an end.
Sterling recovered slightly due to news that the Bank of England (BoE) was preparing to ease bank lending rules across the UK.
However, investors remained concerned due to comments from Governor Mark Carney that the bank’s previously-forecast warnings associated with a Brexit were proving accurate following the historic vote.
Carney also heavily hinted that additional easing and stimulus measures could be delivered in the central bank’s next policy meeting – which is next week.
If the BoE cuts interest rates or expands quantitative easing we could see the Pound Euro exchange rate hit fresh multi-year lows.
Over in the Eurozone, the Euro strengthened as the Pound slipped despite warnings from Markit that Eurozone growth could slip as low as 0.3% in Q2.
(Previously update 14:13 05/07/2016)
Pound Euro Exchange Rate Down to 1.17 Today
The Pound Euro exchange rate fell to new multi-year lows during the European session as the UK’s service sector PMI declined by more-than-forecast.
Brexit news, including a spat between ex UKIP leader Nigel Farage and prospective Conservative leader Theresa May, added to the Pound’s woes – as did the Bank of England’s (BoE) Financial Stability report.
While it appears that the central bank has plans to support the UK economy in its hour of need, the focus on the risks facing the domestic economy did put the Pound under pressure.
The GBP/EUR pairing is currently trending in the region of 1.1781.
(Previously updated 08:00 05/07/2016)
The Pound Euro exchange rate fluctuated relatively flatly on Monday after recovering slightly from its lowest levels since 2013. The pair slipped lower at the end of last week, despite Pound recovery attempts, as BoE Governor Carney indicated UK stimulus was on the way.
GBP/EUR was trending relatively flatly in the region of 1.1915 on Monday afternoon after briefly slipping below 1.19 on Monday morning. The pair has lost over 10 cents since the day of the EU Referendum vote and could be set to lose even more value.
Pound (GBP) Sentiment Remains Low as Brexit Effects Look to Take Hold
The Pound trended flatly on Monday as investors sought out other, safer investments with many British investments continuing to drop lower.
The UK currency extended its shocking Brexit-inspired drops last Thursday after Bank of England (BoE) Governor Mark Carney indicated that the bank would be introducing new fiscal easing measures in the coming months.
Sterling continued to drop during Friday’s session as UK Chancellor George Osborne confirmed that the Treasury was abandoning its 2020 trade surplus targets.
While many analysts had already predicted the target would not be met before a Brexit was even confirmed, Osborne’s own admission that this target would not be met shook confidence.
On Monday’s session, Osborne followed up these comments by announcing that corporation taxes would be cut in order to encourage UK investment, in an effort to keep the UK’s business landscape competitive despite Brexit worries. BBC reports;
‘In an interview with the Financial Times, the chancellor said he would reduce the rate to below 15% – some 5% lower than its current 20% rate.
That would give the UK the lowest corporation tax of any major economy.’
According to Bloomberg, the Pound’s recent drop had been its worst since 2009. As a result, it was the worst performing major currency in June and caused a massive spark in demand for ‘safe-haven’ assets.
Britain’s political uncertainties also continued on Monday this week. The Conservative leadership contest is due to begin its first full week, and efforts from Labour MPs to oust Leader Jeremy Corbyn are ongoing. Notably, UKIP Leader and ‘Leave’ camp figurehead Nigel Farage stepped down from his role on Monday.
Euro (EUR) Struggles as Eurozone Concerns Continue
Appeal for the Euro has also remained low since the United Kingdom voted to leave the European Union in late June. Analysts across the bloc have speculated about a possible fallout occurring from other EU nations pulling their own exits from the EU after the Brexit.
An article from the Financial Times details how the market reaction towards the Brexit may have affected some EU nations;
‘The frightening market response to the Brexit vote probably drove Spanish voters back to the political centre, but the old pressures will reassert themselves soon enough. Populists have electoral openings in Austria, Italy and France over the next year. The ability of the ECB to favour the most highly indebted countries of the Eurozone is no less controversial this month than last. And the politics of transferring financial resources to the periphery will have become more fraught since Brexit, not less. Indebted countries may be more willing to play the “exit card”, but it is hard to imagine the attitude of the German public softening.’
This report followed news that Eurozone bond yields had been mixed in the last few weeks. While German bunds widened considerably, Spanish bond-yields tightened.
However, the Euro has remained easily susceptible to news of the Brexit’s possible negative effects on the Eurozone. The Standard & Poor Global Ratings index stated on Monday that it had cut its Eurozone growth forecasts;
‘For the Eurozone, despite the increased uncertainties and the hit to foreign demand resulting from Brexit, we do not at this point expect the recovery to stall. However, we estimate the Brexit effect will cost the euro zone 0.8 percent of GDP (gross domestic product) over 2017 and 2018’
Last Friday’s Manufacturing data for the Eurozone came in well above expectations, but doesn’t appear to have boosted Euro sentiment as investors remain focused on Brexit news.
Pound Euro Exchange Rate Forecast: Tory Leadership Contest Enters First Vote Stage
Today the UK Conservative party’s leadership contest enters its voting stages after the leadership nominees spent the last week setting out their cases for why they would make a strong Prime Minister.
From Tuesday the 5th of July, secret ballots given to the 330 Conservative MPs will be held every Tuesday and Thursday until the current list of five Conservative nominees is narrowed down to two.
This means that within a week, the finalists to go to Conservative member vote will be known. It is also possible the final two will be reached in less than a week if some runners drop out early.
Markets will also expect development in the Labour leadership situation in the next few days. Leader Jeremy Corbyn stated on Monday afternoon that he would not be resigning, and called to other Labour MPs for unity.
As Corbyn will not resign, many expect he will be challenged by Labour member Angela Eagle for his leadership in the next week.
Sterling is unlikely to make significant gains in this time of uncertainty, but the Euro is also likely to remain weak due to the Eurozone’s close association with the current Brexit fallout.