In today’s Euro forecast, I’ll explain how Pound vs Euro exchange rates seemed to have settled within a narrow range over the past week. The interbank rate has moved between 1.1210 and 1.1120 during the last 7 days.
The lack of movement is similar to trends we’ve already seen a number of times this year. It is when the focus on Brexit reduces, as there is little new or noteworthy news to report. This means that investors are reluctant to move Pounds, while they wait for the next indication on which direction the UK is likely heading with Brexit.
3 weeks until next Prime Minister
We are now only 3 weeks away from the Tories confirming who they have elected as the next party leader and Prime Minister. So far both candidates, Boris Johnson and Jeremy Hunt, have played it safe when campaigning for members to vote them into Number 10.
Boris Johnson seems the more determined to lead the UK out of the EU by the October 31st deadline, with or without deal. A ‘no deal’ is likeliest to cause the most harm to Sterling’s value. Jeremy Hunt is also committed to leaving the EU, but it sounds like he would prefer to avoid a ‘no deal’.
Bank of England statement
Moving away from the politicians, Bank of England (BoE) Governor Mark Carney spoke today. He is renowned for causing Sterling to lose value, as he is rarely optimistic and is cited as a real cynic of Brexit.
However, Mr. Carney’s comments came across quite balanced. Mr. Carney warned investors not to count on the Monetary Policy Committee following other central banks around the world, by cutting interest rates. If the government achieves a smooth Brexit, as the BoE assume, then policymakers expect a rebound in business investment, a rally in the housing market and faster growth, fuelling inflation. This would provide the UK economy with a welcome boost.
The ‘if’ in the statement is the defining part, as it explains why the Pound has struggled to make any gains against the Euro, since peaking on 6th May. While the clock continues to tick, we get closer to the deadline date of 31st October. ‘No deal’ is looking a more likely option than it was on the 1st January. Coincidentally, this is the last time the Pound was valued around these similar levels against the Euro.
Until we start to see how things are going to develop next with Brexit, it is difficult to see where any support for Sterling’s gains are going to come from. Feel free to contact me directly if you’d like to discuss these factors, and the potential impact they could have on your currency transfer. You can email me directly here.