Good morning. GBPEUR has drifter lower this morning after yesterdays Commons vote. The government averted a Rebellion by pro-EU MPs by offering a meaningful vote on the final deal agreed with the EU. This meant they could overturn a series of amendments made by the Lords. However I think this has simply kicked the can down the road, and significant uncertainties remain. This has resulted in the mood towards the Pound souring and the GBPEUR rate moving lower into the €1.13’s. There are a further series of votes today, but there aren’t expected to be any uncertainties with this after ministers have already agreed compromises.
What next for GBPEUR exchange rates?
With this weeks political events now moving into the background, focus will shift back to economic data. This morning we had UK inflation numbers. The key CPI numbers were very slightly below forecast, reducing again the likelihood of a BoE interest rate hike any time soon. This has also contributed to GBPEUR rates dropping this morning. There’s not much else due today so I would expect Pound/Euro rate to remain in the low to mid €1.13’s. EU Industrial production figures have also just been released. This showed a sharper drop in EU productivity than expected. This has weakened the Euro and helped stabilise Sterling/Euro so we’re now steady in the low to mid €1.13’s.
Tomorrow we have UK Retail Sales, expected to show a monthly growth of 0.5%. With nice weather recently there’s a good chance the actual reading will be higher. If so then Sterling could move higher but gains are likely to be limited. Also tomorrow we have the ECB interest rate decision. No change is expected. There’s no press conference by Marion Draghi so this could limit any volatility from this event. On Friday we have EU inflation numbers that could also affect the value of the single currency. All in all I expect the Pound/Euro rate to remain between €1.13 and €1.14 for the remainder of the week.
Sterling/Dollar lower ahead of this evening’s FED interest rate decision
Pound/Dollar rates have moved lower in the $1.33’s this morning. This is partly due to the Pound weakening, but also due to a strengthening US Dollar. Markets think that the Federal Reserve will raise interest rates to 2% this evening at 7pm. As it’s widely expected, it’s already priced into the GBPUSD rate for the most part. Currency markets move on rumour as well as fact, so we might not see much movement in GBPUSD. Thursday sees US jobless figures and Retail Sales, giving further clues about how the US economic is faring.
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