GBP EUR rates saw a good boost higher today after the Bank of England meeting. Although interest rates were held steady the chief economist Andy Haldane voted for a rate hike creating a 6 / 3 split on the monetary policy committee. He indicated that rates may need to rise at the next meeting in August which would take levels up from 0.5% to 0.75%. There was a strong market reaction following the announcement with rates for sterling climbing 0.6% higher against the Euro. The markets are now pricing in a much greater chance that there will be movement in August.
The Euro could find itself under some pressure as developments unfold in the trade war story. The EU are being dragged into the trade tariff war which is stemming from the US and China. Considering economic growth is still not great in the EU and the fact that the European Central Bank is about to conclude its asset purchasing scheme the Euro could struggle if EU export markets are dented.
Tomorrow sees manufacturing and services purchasing managers index data and will be seen as a good barometer for these sectors. Anything positive here tomorrow is likely to help see the Euro rally.
There is an EU summit at the end of June which could throw up some surprises for sterling euro exchange rates. The response from the EU next week to the British proposals is likely to shape the direction of rates. There also going to be a series of amendments to the Brexit bill in the coming month and contentious issue could be that of the customs union. Expect considerable volatility as the path to Brexit slowly but surely becomes clearer.
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