Euro may Turn Volatile on Draghi’s Jackson Hole Comments
Future Euro to Pound movement may take place over the weekend, starting from August 24th.
This is because European Central Bank (ECB) President Mario Draghi will be attending the Jackson Hole Symposium, an international meeting of central bankers.
As the meeting takes place in the US, most economists will be focusing on speeches from Federal Reserve officials. Draghi may still acquire quite an audience, however, as this will be his first speech at the event in three years.
Danske Bank analysts are not expecting anything dramatic from Draghi, which could lead to Euro losses;
‘We expect [Draghi] to deliver a dovish message and to not give any new communication on the issue of tapering of asset purchases’.
Any signs that the Eurozone will see no movement towards monetary policy tightening may result in the Euro losing ground against the Pound.
Brexit ‘Policy Papers’ may Cause Near-term GBP EUR Turbulence
Looking ahead, the Pound could continue to be strongly influenced by the UK government’s policy papers on Brexit.
These set out the official government aims in key areas of Brexit negotiations, such as the status of the Irish border and the rights of EU citizens in the UK.
Unfortunately for the Pound, the reception to the initial Irish border proposal was decidedly mixed. Some labelled plans for a ‘frictionless border’ as a positive ambition, but others considered the fact that this could enable a ‘backdoor’ into the UK via Ireland.
Future policy papers will include the UK government’s plans to separate the UK from the European Court of Justice (ECJ). Although the paper has yet to be released, a former legal head has already downplayed the objectives detailed in the document.
Sir Paul Jenkins, former Treasury solicitor, has stated that the UK will fail to ‘take back control’ if it goes ahead with the government’s policy plan. Jenkins has declared that;
‘Not only must [new UK rules] be the same [as EU rules] but there must be consistent policing of those rules. If Theresa May’s red line means we cannot be tied to the ECJ, the Brexit treaty will need to provide a parallel policing system.
That may be a new court but, in reality, any new court will have to follow what the ECJ says about the EU’s own rules, otherwise the new system won’t work. So, never mind Theresa May’s foolish red line; we will have the ECJ in all but name’.
If the next set of policy papers get a negative reception from traders, a near-term Pound to Euro slide could take place.
Recent Interbank EUR GBP Exchange Rates
At the time of writing, the Euro to Pound (EUR GBP) exchange rate was trading at 0.9117 and the Pound to Euro (GBP EUR) exchange rate was trading at 1.0966.