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Pound to Euro Rate Rises ahead of Major Speech from ECB’s Draghi

The Pound has appreciated against the Euro today, although this is mainly down to Euro trader uncertainty ahead of a major central bank speech.

  • GBP EUR rate up to 1.0867 – EUR GBP trades down at 0.9203
  • Pound trades higher due to Euro weakness – Johnson concedes Brexit ‘divorce bill’ must be paid
  • Euro slides on IFO stats – Traders unsure about upcoming Draghi speech
  • Euro may remain in control before next UK data – Euro could turn volatile on Draghi speech

While Sterling has climbed against the Euro, these gains may prove short-lived depending on what transpires at the Jackson Hole Symposium.

Pound Trades Higher despite Johnson’s Thoughts on Brexit ‘Divorce Bill’

Since yesterday’s mixed UK GDP and flat business investment announcements, the Pound has posted a minor gain against the Euro. The rise to an exchange rate of around 1.0867 comes in spite of a reversal in Boris Johnson’s outlook about Brexit.

Previously, the Foreign Secretary had rejected the idea of paying a ‘divorce bill’ to the EU, declaring that EU officials could ‘go whistle’.

In a recent speech, however, Johnson has changed tack, stating that;

‘Some of the sums that I’ve seen seemed to be very high and, of course, we will meet our obligations. We are law-abiding, bill-paying people. The UK has contributed hundreds of billions [to the EU] over the years.

I’m not saying that I accept [EU chief Brexit negotiator, Michel] Barnier’s interpretation of what our obligations are. But I’m certainly saying that we have to meet our legal obligations as we understand them and that’s what you’d expect the British government to do’.

German Confidence Figures Fail to Inspire Higher Euro Trading

In the lull before a highly-anticipated speech, the Euro has traded down against the Pound.

This decline follows a mixed set of data for second quarter GDP figures for Germany. Annual growth has been revised up, but quarterly growth has fallen slightly.

Bringing a more negative influence have been IFO survey scores for economic confidence. In August, perceptions of the business climate have worsened, along with thoughts about current economic conditions.

Near-term Euro to Pound Turbulence likely as Draghi Speaks at Jackson Hole

The Euro could face high volatility this evening, after European Central Bank (ECB) President Mario Draghi gives a speech at the Jackson Hole Symposium.

This is a US-based event, which brings together central bankers from around the world. Draghi will be speaking for the first time in three years, which only adds to the potential impact of his comments.

According to the schedule, Draghi will be giving the ‘luncheon address’, but this could still bring a marked shift in the current Euro to Pound exchange rate.

Predictions are mixed as to what Draghi might say at the event, but Claus Vistesen of Pantheon Macroeconomics thinks that there might be disappointment;

‘When people first started talking about Jackson Hole there was the expectation that Draghi and the ECB would come full circle, because it was at Jackson Hole [in 2014] originally that he laid out the foundation for quantitative easing. People expected that as the economy was doing better, that he would be able to do the opposite this time. But there’s no room for that’.

The next major UK data isn’t due until August 30th, so the Euro could remain the dominant factor in the pairing until then.

Current Interbank GBP EUR Exchange Rates

At the time of writing, the Pound to Euro (GBP EUR) exchange rate was trading at 1.0867 and the Euro to Pound (EUR GBP) exchange rate was trading at 0.9203.