Prospect of a 2016 ‘Brexit’ Referendum Harms Pound Sterling
Hints from David Cameron that the UK could hold an in-out referendum on EU membership in 2016, rather than 2017 as previously expected, has shaken trader confidence. As a result Pound Sterling is trending down -0.2% against the Euro.
The US Dollar continues to trend up against Pound Sterling despite both the Markit Services and Composite PMIs dropping.
Pound Sterling is trending up against the Euro after comments from David Cameron on positive progress made during EU reform negotiations. Meanwhile, the Pound Sterling to US Dollar (GBP/USD) exchange rate is trading narrowly.
GBP/EUR Exchange Rate Forecast: Pound Sterling on the Rise Following Optimistic Cameron Negotiation Comments
David Cameron has claimed that there has been ‘good progress’ made during talks on Britain’s membership of the EU. The Prime Minister is currently pushing for four key changes to legislation which will help to protect the UK’s interests. Among the proposed changes are protection for non-Euro countries from the financial risks of the currency bloc, including officially recognising the multi-currency nature of the EU and exempting non-Euro countries having to bailout Eurozone countries who get into financial trouble. Mr Cameron also wants cuts to market regulations (a move also supported by Germany), gain protection for the UK government from further political integration and see the implementation of new rules which would prevent EU migrants from claiming UK benefits until they had been resident in the UK for four years.
Mr Cameron was hoping to reach a deal on these matters by February and while he has acknowledged that will be hard, his comments that there has been ‘a big step forward’ towards a ‘better deal’ have seen Pound Sterling appreciate.
The GBP/EUR exchange rate is currently trending up 0.2%.
GBP/USD Exchange Rate Holds Opening Levels as US Dollar Recovery Meets Strengthening Pound Sterling
The US Dollar softened on Thursday following an initial gain in the wake of the Federal Reserve announcing the expected 0.25% hike to interest rates – a move which surprised very few. The GBP/USD exchange rate fell below a key resistance level of 1.50 s but the ‘Buck’ later gave up some of its gains, continuing a modest downtrend until the end of Thursday’s European session. Today, the US Dollar is trending up against the Swiss Franc (CHF) and the Euro (EUR), although it is losing ground to most of the major currencies.
Fed Chair Janet Yellen’s confidence in the economy, as well as news that additional rate hikes will be gradual, has calmed investors and seen the US Dollar strengthen against Pound Sterling. However, the British asset has been able to hold its own thanks to David Cameron’s claims that negotiations on the UK’s positon in the EU are looking positive. Pound Sterling has also been bolstered by yesterday’s strong retail sales release which showed a 3.9% year-on-year (YoY) increase in consumer spending.
The GBP/USD exchange rate is currently trending in the region of 1.4927.
GBP/EUR, GBP/USD Exchange Rate Forecasts
There is no UK data due out today and little from the Eurozone, to drive changes in the currency markets, however there could be movement if there is more news from the negotiations in Brussels. The US Markit composite and services PMIs, as well as the Baker Hughes Rig Count are due out later.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3792, while the Euro to Pound Sterling (EUR/GBP) exchange rate is trading around 0.7252.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trading in the region of 1.4924, while the US Dollar to Pound Sterling (USD/GBP) exchange rate is trending around 0.6700.