The Pound (GBP) has continued to trade tightly against the Euro (EUR) today, due to concerns about Brexit exacerbated by BoE news.
The Bank of England (BoE) financial stability report has found that a lot more negotiation is needed before the UK economy is fully shielded against Brexit.
On the plus side, the BoE report states that UK banks should be able to continue operating normally even without a good Brexit deal.
Less positively, the BoE warns that there is still no agreement in place with the EU to secure continued operation of contracts worth trillions of Pounds.
(Last updated 27th June, 2018)
Chance for GBP/EUR Exchange Rate Rise on Optimistic BoE Report
The Pound (GBP) has traded in a narrow range against the Euro (EUR) today, ahead of a Bank of England (BoE) financial stability report release.
This will be out on Wednesday morning and might break the current deadlock and push Pound Sterling up in the pairing.
If the report suggests that the UK economy is fundamentally stable and might be on track to strengthen in the coming months, the Pound could appreciate.
That said, it is similarly possible that the report will have a negative or cautious outlook, in which case the Pound might remain static against the Euro tomorrow.
Will Dovish Display from New BoE Policymaker Weaken Future GBP/EUR Exchange Rate?
Less concretely, the Pound to Euro (GBP/EUR) exchange rate could also be affected by the newest Bank of England (BoE) policymaker.
Jonathan Haskel, who will be taking over from Ian McCafferty in September, might take a more cautious outlook by comparison.
Mr Haskel has already unsettled GBP traders in his initial remarks by suggesting that there are risks if the interest rates rise too quickly.
If he follows through and backs an interest rate freeze at his first Monetary Policy Committee (MPC) meeting then the GBP/EUR exchange rate could drop.
Mr McCafferty has been one of the rate policymakers backing higher interest rates over recent years, so an opposite replacement could disappoint traders.
Euro to Pound Exchange Rate Forecast: Will Falling Eurozone Confidence Scores Drag EUR/GBP Lower?
There is a risk of a sharp Euro to Pound (EUR/GBP) exchange rate decline in the near-future, when Eurozone confidence data is released on Thursday morning.
The measures for June are predicted to show falling levels of confidence during the month, across a wide range of different fields.
These include business confidence and services sector sentiment, along with finalised consumer confidence and economic sentiment.
If all of these measurements of optimism in the single currency bloc show a decline then the Euro could fall sharply against Pound Sterling.
Will Eurozone Inflation Rate Estimate Cause EUR/GBP Exchange Rate Recovery?
Beyond a potential Euro to Pound (EUR/GBP) exchange rate crash on Thursday, the Euro might be able to recover later this week on Friday morning.
Flash inflation rate estimates for June are expected to show a slowdown for the core year-on-year reading, but a converse rise in the base annual reading.
An estimate for higher inflation in the single currency bloc might be enough to boost the Euro (EUR), as an estimated rise from 1.9% to 2% is anticipated.
This would put inflation on the European Central Bank’s (ECB) target and might lead to greater inflation above the ECB’s 2% target range.
Such a development would increase the odds of an ECB interest rate hike sooner rather than later; at present a hike isn’t expected until mid-2019 at the earliest.
If both of the flash readings print above expectations, then there could be a late-week EUR/GBP exchange rate rise.
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