- Pound to Euro Exchange Rate Slides Further on Monday – Drops below 1.20 against Euro
- Uncertainty in Britain Continues – Labour Party in crisis as many resign
- Euro (EUR) Weighed Down by European Sentiment – Euroscepticism on the rise
- Forecast:Will Pound Gain on Euro? – Euro sentiment plummets alongside Pound
Pound Euro Exchange Rate Recovers Further on Wednesday
Despite dropping below 1.20 earlier in the week, the Pound Euro exchange rate climbed to above 1.2150 on Wednesday afternoon as markets calmed and bought Sterling from its lowest levels.
The Euro, on the other hand, was weakened due to poor EU sentiment, as well as news that Eurozone bond yields had dropped this week. However, the shared currency may be in a position to improve if a report from Reuters, indicating that the ECB will not introduce further easing in response to Brexit, proves true.
Uncertainty remained high in Britain throughout Wednesday. Conservative MP Stephen Crabb officially announced his candidacy for Prime Minister, but ‘Leave’ camp head Boris Johnson remains the favourite to win despite his radio silence.
The Pound Euro exchange rate trended in the region of 1.2160 at the time of writing, but the pressured Pound could easily drop again in the coming days as markets fully come to terms with the reductions in the UK’s credit ratings from major ratings agencies, Fitch, Moody’s and Standard & Poor’s.
(Previously update 09:30 29/06/2016)
Pound Euro Exchange Exchange Rate Edges Higher after EU Referendum Tumble
After dropping to a fresh multi-year low on Monday, the Pound Euro exchange rate climbed 0.5% as European trading began on Tuesday. Sterling managed to hold these gains into Wednesday in spite of Germany’s GfK Consumer Confidence report showing improvement. In light of the fact the sentiment data was compiled before the UK opted to leave the EU, it’s likely that the gauge will drop considerably in the months ahead.
However, GBP/EUR remains in the region of 1.2060 – down roughly 11 cents since the outcome of the EU referendum was announced.
Long-term, some analysts have projected that the Pound could fall to parity against its European counterpart.
The UK’s uncertain economic situation was highlighted on Tuesday as two top ratings agencies, Standard & Poor’s and Fitch indicated that the UK’s credit rating could be reconsidered in light of the Brexit developments.
(Previously updated 07:00 28/06/2016)
The Pound Euro exchange rate has continued to fall since markets opened on Monday morning, with investors continuing to sell and devalue the Pound after Britain’s historic decision to ‘Leave’ the European Union last Friday.
GBP/EUR briefly fell below the key level of 1.20 during Monday’s session and could continue to drop. While the pair’s fall has slowed since it dropped over 750 pips on Friday, it lost an additional 320+ pips on Monday and trended in the region of 1.2000 on Monday afternoon.
Pound (GBP) Undermined as List of Uncertainties Multiplies
Despite the Euro weakening due to the shock of a Brexit reverberating across the European Union, the Pound was unsurprisingly worse off as the United Kingdom’s uncertainties worsened over the weekend and Monday.
Scottish National Party (SNP) Leader Nicola Sturgeon has made calls for Scotland to hold a second Scottish Referendum before the UK can leave the EU, in order to allow Scotland to maintain its EU membership.
Struggles within the UK’s government were also ongoing. According to Sky News, Britain could have a new Conservative Prime Minister as early as September. This follows PM David Cameron’s surprise resignation on the morning of the EU Referendum’s results.
‘A new prime minister and Conservative leader should be in place by 2 September, the party’s 1922 Committee of senior backbench MPs has recommended.
It said nominations should open on Wednesday and close at noon on Thursday, at an emergency meeting in Westminster.’
Not only is the Conservative party in a state of repair; their primary opponents, the Labour party, have also been in crisis thus far this week.
A large amount of front benchers for the party have resigned in protest against Leader Jeremy Corbyn, who some Labour members believe did not do enough to unify the party during or since the Referendum campaign. The BBC reports;
‘Mr Corbyn, who was elected in September in a landslide victory, is facing a vote of no confidence from Labour MPs.
Shadow business secretary Angela Eagle, Maria Eagle (defence) Lisa Nandy (energy) and Owen Smith (work and pensions) are among the latest members of the front bench to resign.
Mr Corbyn has pledged to stand in any new leadership election if there is a formal challenge to his position.’
Euro (EUR) Exchange Rate Weakened by Eurozone Fears
The Euro has remained weaker against the Pound than against many other major currencies, with the pair fluctuating slightly from its lows on Monday.
News that Britain would be withdrawing from the EU weighed heavily on sentiment of the Eurozone, alongside an increase in Euroscepticism among EU members and worries that more nations would follow Britain in leaving the bloc.
Investors are also eagerly awaiting news on monetary policy which they expect to be put into place in the near future in response to the Brexit. However, according to Reuters most traders do not expect the ECB’s already-negative deposit rate to be cut further from -0.40 this year.
European Central Bank (ECB) President Mario Draghi had previously stated that the bank had contingency measures put in place that could be utilised in the event of a Brexit. As a result the Euro’s movement has remained weak with investors half-expecting new easing measures to be introduced soon.
Pound Euro Exchange Rate Forecast: GBP/EUR Could Fluctuate
As the Euro continues to weaken from Eurozone uncertainty and fears that the European Union was losing its unity, it’s possible that Sterling will recover slightly against it in the coming week.
However, this recovery is unlikely to be considerable as the Pound remains widely unappealing within the forex market.
Uncertainty in Britain is likely to continue in both the long and short term, with speculation that Scotland and Northern Ireland will explore the possibility of leaving the UK as well as the reformations of the key Conservative and Labour parties.
With the Labour party currently losing many of its key members due to a lack of confidence in Leader Jeremy Corbyn, markets may react to a thoroughly different Labour party by the end of the week.
In terms of monetary policy, investors are also waiting with bated breath for new comments from the Bank of England (BoE) and European Central Bank (ECB). The BoE is currently speculated to be on track to cut the key UK interest rate from its record-low 0.50%.
ECB President Mario Draghi is expected to speak on Tuesday or Wednesday during his retreat in Sintra. It is unknown how in-depth he will go on the future of ECB policies or the reaction to the Brexit, but his remarks are likely to impact the Pound Euro exchange rate.