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Pound Crashes -0.7% against the Euro on Draghi Comments

The Pound has significantly worsened against the Euro in trading on Tuesday’s afternoon session. Opening pairing movement at around 1.13331, Sterling has since fallen to 1.1307, having dipped to an even lower 1.1299 during the day.

This worsening is actually due to Eurozone news; European Central Bank (ECB) President Mario Draghi gave a speech on Tuesday morning. Draghi was optimistic about the effects of ECB policy, stating that Eurozone inflation could average at 1.7% until 2019.

The Euro soared on the news, as traders also assumed that the ECB could be lessening its quantitative easing program, based on Draghi’s remarks.

In UK news, the Bank of England (BoE) financial stability report has presented a mixed picture. The BoE estimated that UK banks had enough reserves to handle a financial crisis, but BoE Governor Mark Carney voiced concern about current levels of potentially-risky lending across the UK.

(First published 09:40, June 27th, 2017)

The Pound has fallen slightly against the Euro today, as the UK moves from one Northern Irish issue to another.

  • GBP EUR rate drops to 1.1331 – EUR GBP trades up at 0.8823
  • Pound weakened by further NI concerns – Power-sharing government remains uncertain
  • Euro rises on Draghi comments – Forecast-beating Italian confidence scores seen
  • Pound crash possible on BoE report – Further Euro gains may come from French confidence score

The latest GBP EUR decline has been part of high pairing fluctuation this week. The recent dip puts the exchange rate at a weekly low.

Pound Tumbles on Fresh NI Fears

The Pound’s losses today come in spite of the Conservatives finally reaching an agreement with the Democratic Unionist Party (DUP).

The £1bn deal to secure DUP support has been alternately praised and criticised, but Northern Ireland’s politics are still on a potential collision course.

Northern Ireland has lacked a power-sharing government since the start of the year, with the Sinn Fein party maintaining a strong opposition to the DUP.

If the two parties cannot reach an agreement to share power by Thursday’s deadline, the £1bn may end up being spent by the Westminster government, rather than by Northern Irish MPs.

Euro Ticks Up on Draghi Comments

The Euro has appreciated against the Pound by 0.3% today, thanks to recent comments from European Central Bank (ECB) President Mario Draghi.

The President has stated that he expects Eurozone inflation to rise to 1.7% on average over 2016-2019. This would raise the chances of a Eurozone interest rate hike, as it would put inflation close to the ECB’s target of 2%.

Draghi’s optimism has come alongside rising Italian consumer confidence scores, which have beaten forecasts in June.

Pound to Euro Forecast: GBP Crash Possible on BoE Stability Report

The Pound may face serious difficulties in the near-term, when the Bank of England (BoE) stability report is released.

The report could potentially be a damning one for the UK, as it may highlight the worsening impact of squeezed UK real incomes. With inflation having exceeded the rate of wage growth for several months now, UK consumers are finding that they have less to spend on inessentials.

This negatively affects UK retail sales figures, which in turn can lower national GDP due to less economic activity.

If the stability report is especially pessimistic in this regard then the Pound may tumble against the Euro. On the other hand, the report will be followed by comments from BoE Governor Mark Carney.

If Carney changes his view on a UK interest rate hike, the Pound could rise sharply against the Euro. Carney has previously rejected the idea of a 2017 UK rate hike, whereas even long-time cautious policymakers like Andy Haldane have hinted at a 2017 hike despite the current income pressure.

The next Eurozone data is out on Wednesday, covering French consumer confidence and Italian inflation in June.

Minor Euro appreciation could come from both results, as the confidence index is predicted to rise as is Italian inflation.

Current Interbank GBP EUR Exchange Rates

At the time of writing, the Pound to Euro (GBP EUR) exchange rate was trading at 1.1331 and the Euro to Pound (EUR GBP) exchange rate was trading at 0.8823.