- Pound Euro Exchange Rate sees Approximate 1 Cent Rally – Easing in Sterling sell off sees currency bolstered.
- Ian Duncan Smith’s Successor Stephen Crabb Formally Announces Leadership Bid – Previously unknown lawmaker vies for power amidst the post-Brexit turmoil.
- Euro Rallies as Profit Taking Takes Toll on US Dollar – Eurostocks have rallied at least 1% across the board since the start of today’s session.
- Forecast Looks Slightly More Positive as Informal Negations Technically Occur – David Cameron’s two-day meeting with the EU heads comes to an end.
The Pound Euro exchange rate has traded narrowly for the past three days after an initial slide on Monday, but GBP appears to be rallying again today.
Monday morning’s notable GBP/EUR drop coincided with a speech given by British Chancellor of the Exchequer George Osborne, in an attempt to quell market jitters that seemingly backfired. Osborne stated that while it will not be plain-sailing for a post-Brexit UK, there are ‘robust contingency plans’ in place.
Barring the movement possibly caused by Osborne’s lack of any actual plan, the Pound Euro exchange rate has continued to trade in a limited range between 1.19 and 1.20 since Monday, a sign that Sterling may have reached some point of resistance.
However we have already seen a 0.40% rally for the pairing today, possibly pointing to the ongoing Brexit uncertainty abating somewhat.
As of time of writing, the Pound Euro exchange rate was trading at 1.2103.
Pound (GBP) Benefits from Investors Cashing-In Short Bets
Sterling’s micro-rally appears to stem from investors cashing in on short bets on the currency, with the narrow range of movement seen lately hinting that the Pound has found some stability, in the short term at least.
Uncertainty continues to impact markedly on the UK’s economic landscape as both the Labour Party and the Conservatives are embroiled in leadership battles. A dim light shines in the darkness however, a very dim and waning light, as Stephen Crabb announced his plans to run for Tory party leader. Crabb replaced Ian Duncan Smith after Smith resigned over the unpopular planned spending cuts to disabled welfare.
Jeremey Corbyn has managed to procure some support from the general public, with a petition indicating the people’s confidence in Corbyn. So far the petition has collected almost a quarter of a million signatures, lending legitimacy to the theory that as the Labour party has strayed into more centrist and right-wing territory, MPs lack the values that Corbyn and his supporters in the general public hold. So it may be that Corbyn can weather this interregnum if he can acquire enough backing from the public.
Profit Taking Takes Toll on US Dollar, Euro (EUR) Rallies in Consequence
Uncertainty continues to billow out from the smoking crater that was last week’s UK EU referendum but markets have seen some fair movement.
A bout of US Dollar profit-taking has seen USD depreciate as investors decided that safe-haven sentiment was unlikely to rise much further and cashed out while they still stood to make a profit. As a result that has lent the Euro some support. Typically if the US Dollar is moving then the Euro moves in the opposite direction, and we can see European stocks are up at least 1.5% across the board.
European Central Bank President Mario Draghi tactically skirted around the UK’s decision to Brexit during his latest speech in Sintra, Portugal. However his Brexit comments were conspicuous by their absence and it has led to some investors remaining weary. Draghi also eluded to a more globalist approach to monetary policy, mentioning that any unexpected occurrences could be better dealt. He added that a united approach would help limit any serious destabilisation if the European policy makers had a more worldly view.
‘The upshot is that, in a globalised world, the global policy mix matters — and will likely matter more as our economies become more integrated… So we have to think not just about whether our domestic monetary policies are appropriate, but whether they are properly aligned across jurisdictions’
Pound Euro Exchange Rate Forecasts Looking Hopeful as EU Policy Makers Work Together
Now it seems there has been some progress made in regards to monetary policy and the flagging UK political parties’ leadership, it may start to become a little easier to offer an insight into future movements Pound Euro exchange rate movements.
Today is the second and ultimate day of David Cameron’s talks with the EU parliament, a day which has seen Germany flat out stating that the UK cannot wrangle some form of a ‘it’s complicated’ relationship with the EU in regards to trade and free movement. Nigel Farage has also faced boos and jeers from European leaders as he stood to give a speech.
It’s unlikely the Pound is going to be able to record any notable gains until both mainstream UK political parties can find a permanent leader.
With European stocks on the rise and the ECB finally making post-Brexit moves, it is possible we could see some Euro appreciation in the coming days. Uncertainty still remains high, however, as the future of the European Union remains in flux.
For now the Pound Euro exchange rate is trading fairly narrowly around the 1.20 mark and any further significant losses are not expected unless we start to see some worrying investment decisions as a result of the Brexit fallout.