Wednesday, 10 June 2015

Will Pound strengthen against Euro June 2016?

Wednesday 10th June 2015
In the last few weeks, the Pound/Euro rate has fallen significantly, mainly due to the fact it looks like Greece are making progress with regards to their debts. Having said that, in the last 24 hours we’ve actually seen a very slight recovery in GBP/EUR rates, although we’re now a long way away from the 8 year high we saw just a month ago, as you can see from the chart below: 


Since my last post on Monday, Sterling had fallen further against the Euro and other currencies, hurt by concerns over the strength of the UK economy. The Pound is suffering from persistent concerns over the strength of Britain's economy. Recent figures have shown growth in Britain's service sector slowed a great deal in May, while inflation has turned negative for the first time in over 50 years, suggesting the Bank of England will hold off from raising interest rates until at least the middle of next year. 

However despite the GBP/EUR rate falling into the €1.35’s, this morning we’ve seen a slight recovery to almost €1.37, due to much better than expected Industrial production figures. Manufacturing data disappointed, but overall the markets took the Industrial figures as positive, helping to push the Pound higher against other currencies including the Euro and US Dollar. 

Will the Pound strengthen against the Euro? 


There are a few key things today that could affect the GBP/EUR exchange rate one way or the other. Later today we have a Gross Domestic Product estimate from the NIESR. The last reading was 0.4% so any deviation from this number could affect the Pound. 

Later this evening at 21:00pm, we have a very important Speech by Bank of England governor Mark Carney at Mansion House. Last year when he gave this speech, regular readers may remember that he stated that interest rates may rise sooner than people think. The reaction to this was a huge boost for Sterling. This time around, while I don’t expect him to be quite as loose with his words, everything he says will be very closely watched indeed for any indication on future monetary policy. I don’t think that interest rates are going anywhere for at least 12 months, and if this expectation is pushed back even further tonight, the Pound could suffer and exchange rates could drop. 

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