- Pound Euro Exchange Rate Forecast to Stand Firm – BoE decision in focus
- Sterling (GBP) Surged on PM News – Theresa May moves into No. 10
- Update: BoE Decision Meeting Today – Bank shocks by leaving rates on hold
- Forecast: Theresa May’s First Week in Office – Will Brexit discussions begin soon?
Pound Euro Exchange Rate Nears Best Post-Brexit Level After BoE Meeting
As Thursday’s European session drew to an end, the Pound Euro exchange rate hovered above the key level of 1.20, making it the highest level the pair has remained at since the last week of June.
While Sterling may be on track to sustain significant gains this week, GBP/EUR will begin to feel pressured again quite quickly next week with the Bank of England’s (BoE) August meeting less than three weeks away.
The BoE has heavily indicated that it will introduce stimulus of some kind in August, and bets for August stimulus soared following Thursday’s session.
However, the relief that a rate cut was not forthcoming in July provided the Pound with a welcome boost and the currency was able to advance on the majority of its currency counterparts, advancing 2 cents against both the US Dollar and Euro.
The European Central Bank (ECB) is due to meet next week, and could provide the Euro some small relief if policymakers indicate that the Eurozone has weathered some of the Brexit’s shockwaves.
The Pound managed to remain trending around the 1.20 mark against the Euro on Friday in spite of comments issued by Andy Haldane, the BoE’s chief economist.
Haldane indicated that the central bank would be unveiling stimulus measures in the near future, making rate adjustments in August increasingly likely.
(Previously updated 16:00 14/07/2016)
The Pound Euro exchange rate soared all the way to 1.2119 on Thursday in the wake of the Bank of England’s (BoE) interest rate announcement.
It had been expected that the central bank would cut rates in order to limit the impact of Brexit headwinds but policymakers actually voted 8-1 in favour of leaving borrowing costs on hold.
According to industry expert Connor Campbell: ‘Given that Theresa May is still without a fully-appointed cabinet, and the fact that the actual referendum happened barely 3 weeks ago (the sheer number of political and market twists since then makes it feel further in the rear-view than it actually is), the Bank of England’s decision not to set the cat among the already flustered pigeons was probably wise.’
(Previously updated 09:00 14/07/2016)
Pound Euro Exchange Rate Heads Downward on Wednesday
After Tuesday’s Pound rally, the Pound Euro exchange rate began to lose ground from its weekly best level of 1.2041. It currently trends in the region of 1.1880.
Briefly reaching this peak during Wednesday’s Asian session, markets began to change direction due to the increasing imminence of the Bank of England’s (BoE) first post-Brexit meeting.
Investors set about readjusting the Pound’s value on Wednesday, as well as their own position on the currency, amid expectations that a UK interest rate cut was on the horizon.
Tomorrow, around midday, the Bank of England will set the Pound’s path for the remainder of the week with its decision. Most analysts predict that the bank will introduce various stimulus measures as well as a rate cut, which will send Sterling plummeting.
While a rate cut of -0.25% is widely expected, the benchmark rate could be taken as low as 0.0%. The extent of the measures applied will decide how much volatility Pound exchange rates experience.
The tone of the accompanying meeting minutes will also be important for gauging where policymakers see the economy heading over the next few months.
Extremely dovish commentary is likely to keep further downward pressure on Sterling.
(Previously updated 14:37 BST 13/07/2016)
After two days of bullishness on Monday’s Conservative leadership news, the Pound Euro exchange rate forecast is a little less sunny for the coming day as markets are likely to adjust their positions ahead of Thursday’s key Bank of England (BoE) meeting.
GBP/EUR surged strongly on Tuesday as markets celebrated a perceived end to UK’s leadership uncertainty. Confirmation that Theresa May would succeed David Cameron as PM by Wednesday saw the pair gain almost a cent to trend at levels around 1.1850 on Tuesday afternoon.
The Pound then went on to hit a high of 1.2048 against its European counterpart, although it has since moved away from this level to trend in the region of 1.1970.
While this is markedly stronger than the pairing’s recent lows of 1.15, Sterling remains around 11 cents lower than it was before the EU referendum results were announced.
Pound (GBP) Surges as Political Uncertainty Eases Early
Sterling was on track to complete the second day of its rally on Tuesday despite the imminence of the Bank of England’s (BoE) upcoming interest rate decision.
Markets have reacted favourably to the sudden, early conclusion of the Conservative leadership contest, with MP Theresa May left as the last candidate standing and thus automatically becoming David Cameron’s successor as UK Prime Minister.
The contest was initially expected to run until September, at which point all Conservative members would vote between the two campaigning frontrunners. However, May’s opponent, Andrea Leadsom, withdrew from the contest on Monday.
Amid an extended period of political uncertainty following the UK’s Brexit vote and David Cameron’s sudden resignation, knowing who the Prime Minister will be injected some confidence into UK markets.
Sterling even defied the latest comments from BoE Governor Mark Carney. Carney stated on Tuesday that the bank had a series of post-Brexit stimulus tools at its disposal, a speech that would typically undermine a Pound rally so soon before the central bank’s next meeting.
Regardless, the Pound surged across the board. Cameron has confirmed that May will be Prime Minister by Wednesday evening.
Euro (EUR) Limp, Caught up in Risk Cross-Flows
The Euro saw little inspired movement during Tuesday’s session despite comments from the Eurogroup that Italy’s perceived banking crisis was perhaps not as bad as some had suggested.
Eurogroup President Jeroen Dijsselbloem admitted that there was an issue with bad debts in Italian banks, but added that the issue was not new and was not caused by recent market turmoil. He indicated that the situation would instead be handled over time.
As Britain’s new Prime Minister has been confirmed earlier than expected, many are expecting that EU leaders will begin to pressure Britain to begin the formal Brexit process soon in order to prevent further uncertainty from harming the EU economy. According to MarketWatch;
‘Eurozone finance ministers meeting in Brussels cautioned that prolonged uncertainty over the European Union’s future relationship with Britain posed a major economic and financial risk, as a top EU official warned the UK’s vote to leave could dent the bloc’s growth.
“The U.K. leave vote has surprised markets, and economic uncertainty has increased significantly since then,” said Pierre Moscovici, the EU’s economic affairs commissioner after the meeting on Monday. “The longer the uncertainty lasts, the costlier it will be for the economy.”’
The Euro has also been tossed around by cross-flows in global risk trade. As the Japanese Yen plummeted, it dragged down other ‘safe-haven’ assets like the US Dollar, allowing the Euro to advance against both.
Investors flooded towards riskier assets however, causing the Euro to flounder against risk-correlated currencies.
Pound Euro Exchange Rate Forecast: Sterling Unlikely to Hold as BoE Meeting Approaches
While markets have been relatively confident since Theresa May was confirmed as the new UK Prime Minister, political uncertainty in the UK remains comparatively high.
Ongoing leadership rows in the Labour party, as well as new leadership contests ahead for the Green and UKIP parties and speculation over when Britain will activate Article 50 to begin the formal Brexit process are likely to be key points of political speculation in coming days and weeks.
Markets are likely to cool considerably during Wednesday’s session in anticipation of Thursday’s highly anticipated Bank of England (BoE) policy decision meeting.
As the first meeting since Britain voted to Brexit in late June, markets are currently placing the chances of an interest rate cut at 75%. Investors are likely to adjust lower on the Pound ahead of the meeting in order to protect their assets and re-evaluate the Pound’s value.
If a new package of stimulus is introduced as expected, Sterling could return closer to last week’s lows. However, in the unexpected event that the bank leaves rates frozen, the Pound could surge even higher, even if only temporarily.
The Euro, on the other hand, is likely to remain limp but could easily improve in sentiment on Thursday if the BoE opts to introduce new easing measures as expected. All in all, the Pound Euro exchange rate forecast is expected to be volatile for a few days of trading.