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Pound to Euro Exchange Rate Rally Possible on Imminent BoE Speeches

The Pound struggled against the Euro on Monday due to limited UK data and today may bring a repeat performance, with Sterling possibly trading tightly due to investor uncertainty.

  • Pound remains unsettled by MEP criticism of EU citizens plan – EU’s Verhofstadt condemns ‘second class citizen’ deal
  • Euro aided by German trade balance surge – Grexit averted with more bailout funds
  • Pound volatility possible on BoE speeches – Euro may advance on Italian production stats

Sterling could bounce back today on UK central bank news, but this is largely dependent on policymakers straying onto the subject of monetary policy.

Pound Sterling Update: Limited UK Data Left Brexit Talks in Focus

Monday’s main drag on Pound to Euro demand was Brexit news, specifically pertaining to the status of EU citizens.

Shortly after Brexit talks began in June, PM Theresa May suggested a draft plan that would allow EU citizens to gain similar status as UK citizens after staying in the country for 5 years.

The plan, which was met with initial grumbling by EU policymakers, has since been roundly criticised by a swathe of MEPs and Guy Verhofstadt, the European Parliament’s Brexit negotiator. In Verhofstadt’s case, he has declared that;

‘[The deal] creates a type of second class citizenship for European Citizens in the UK. We don’t see why their rights should be diminished’.

This talk has all raised concerns that the UK negotiators may have to think on their feet to placate their EU counterparts, or risk seeing a punitive deal for UK citizens in the EU be offered up.

Euro Recap: German Joy at Soaring Trade Surplus

The Euro rose sharply from 0.8833 to 0.8857 on Monday, thanks to highly supportive German data releases.

These results, covering the national trade balance and current account, both showed significant growth in May. For the trade balance figure, the surplus of 18.1bn recorded in May rose to 22bn in June, greatly enthusing German economists.

One such onlooker was Thomas Bozoyan of Germany Trade and Invest, who stated;

‘Germany’s strength as a manufacturing location is well-known, but the faith in that is reinforced by these export statistics. The import statistic is perhaps more significant though, as it shows not only that German companies are manufacturing and doing good business, it is also creating wealth for its residents and increasing consumer demand.

This increase in demand is being felt in other countries as well as Germany, a very good situation. This all has a long-term value-creating effect for the country and will contribute to the stability of the nation and its economy location’.

Elsewhere, some last minute news from Greece provided further support when it was revealed that the nation had been granted €7.7bn in bailout funds.

Pound to Euro Daily Outlook: Sterling Advance Possible if BoE Speakers Turn Hawkish

On another data-deficient day for the UK, the Pound may still be influenced by a pair of Bank of England (BoE) policymaker speeches.

Andy Haldane and Ben Broadbent are both due to give remarks, in London and Scotland respectively.

Neither event seems likely to trigger any discussions on future monetary policy, but such remarks are still not out of the question. Haldane appears to have recently turned hawkish on monetary policy, so any chance remarks about policy tightening could be enough to push the Pound up against the Euro.

Today’s Eurozone news will be much more concrete, covering Italian industrial production figures for May.

These are predicted to show a monthly and annual rise, with the latter result projected to go from 1% to 2.2%.

Such results may be enough to have the Euro firm against the Pound or even trigger a rally, depending on whether or not the BoE policymakers pull through for the UK.

Recent Interbank GBP EUR Exchange Rates

At the time of writing, the Pound to Euro (GBP EUR) exchange rate was trading at 1.1309 and the Euro to Pound (EUR GBP) exchange rate was trading at 0.8841.