GBP/EUR Exchange Rate Muted Following May’s Brexit Defeat
UPDATE 11:43 BST: The Pound Sterling Euro (GBP/EUR) exchange rate is trading narrowly this morning, with markets cautious following Theresa May’s Brexit defeat in the House of Lords.
Sterling sentiment is sliding this morning as the Prime Minister now faces the prospect of a second vote on her EU Withdrawal Bill, after peers voted to amend the bill in an effort to ensure MPs get a final say on any Brexit deal.
Meanwhile the Euro (EUR) is also struggling to find support this morning as ECB President, Mario Draghi reinforced his dovish outlook in a speech earlier today in Portugal.
GBP/EUR Exchange Rate Depreciates in the Wake of Gloomy Growth Forecasts
UNPDATE 13:48 BST: The Pound Sterling Euro (GBP/EUR) exchange rate is sliding this afternoon, with the pairing having relinquished around half a cent, or 0.2%, from its opening levels on the back of a gloomy growth forecast from the British Chambers of Commerce (BCC).
Sterling sentiment is falling as BCC forecasts that 2018 will see the UK experience its worst pace of growth since 2009 as Brexit and trade uncertainty weaken consumer confidence and stifle economic growth.
Meanwhile the Euro looks to tick higher today despite elevated political risks in Germany as Chancellor Angela Merkel faces a standoff with her own interior minister over her asylum polices.
GBP/EUR Exchange Rate Surges as ECB Leaves its Ultra-loose Monetary Policy in Place for at Least another Year
The Pound Sterling Euro (GBP/EUR) exchange rate received a substantial boost during last week’s session, with the pairing’s gains being mostly driven by the European Central Bank’s (ECB) last policy meeting.
The meeting saw ECB head Mario Draghi finally give a timetable for the bank’s exit from its quantitative easing programme, stating it would wind down its bond purchases by the end of 2018.
However this was undermined by the bank’s accompanying pledge to keep interest rates on hold until ‘at least summer 2019’, which prompted heavy losses in the Euro (EUR) exchange rate.
Meanwhile, although it was able to close the week up, the Pound (GBP) struggled in the first half of last week’s session in the face of some mixed UK economic data.
This was largely driven by the release of the UK’s latest wage growth and inflation figures, both of which fell below expectations.
Pound Euro (GBP/EUR) Exchange Rate Subdued as UK Growth Forecasts Cut
The Pound Euro (GBP/EUR) exchange rate starts this week largely muted, with the pairing being pressured by a warning that the UK is facing its weakest growth since the financial crisis.
This is according to the British Chambers of Commerce (BCC), which recently downgraded its latest growth forecasts for the UK.
Analysts at the BCC warn that the UK’s economic growth may slip to just 1.3% in 2018, with the slowdown being attributed to the continued uncertainty surrounding Brexit as well as increased global trade tensions.
Adam Marshall, director general of the BCC, said:
‘A decade on from the start of the financial crisis, the UK now faces another extended period of weak growth amidst a backdrop of both domestic and global uncertainty.’
Euro (EUR) Exchange Rate Steady as Markets Await ECB’s Sintra Forum
At the same time the Euro (EUR) is showing few signs of movement this morning as markets await the start of a three-day ECB forum in Sintra, Portugal, later today.
EUR investors are hopeful the forum will help to shed more light on the ECB’s decision to leave rates on hold until well into 2019 as well as the opportunity to learn more about the bank’s plans to wind down its stimulus programme.
A speech by ECB President, Mario Draghi is likely to be the main draw today, with the Euro potentially falling if Draghi doubles down of his commitment to leave the bank’s ultra-loose monetary policy in place.
GBP/EUR Exchange Rate Forecast: BoE Policy Meeting in the Spotlight
Looking ahead, the main driver of movement in the GBP/EUR exchange rate in this week’s session looks set to be the Bank of England’s (BoE) latest rate decision on Thursday.
While economists are not expecting the BoE to make any policy changes in this month’s meeting, GBP Investors are hoping that policymakers will provide more clarity on whether markets can still expect a hike by the end of 2018.
Analysts suggest the next rate hike may occur in August, something which would likely cause the Pound exchange rate to surge if it is hinted at by markets.
Meanwhile in terms of the Euro (EUR) the focus is likely to be on the latest Eurozone PMI figures at the tail end of the week, with the single currency expected to tumble if growth in the bloc’s private sector continues to slow this month.