Monday, 12 September 2016

What could move Pound/Euro rates this week?

Good morning. Last week was a largely negative one for GBP/EUR rates, falling from highs of €1.20 down to around the €1.18 mark, which is where we start the week. As explained in reports last week, the fall was due to a combination of negative UK data, and the single currency become more expensive to buy, due to a lack of stimulus by Europe's central bank.

What could affect rates this week?


Generally it's economic data releases that move exchange rates. As figures are releases showing how the UK and EU economies are faring, the value of the respective currency can be affected, moving exchange rates. Usually the expected result will already be largely priced into the market, however if the release differs from forecast, that's when we see movements in the rate.

This week is an important one for the Pound. Today is pretty quiet, but tomorrow we have inflationary measures for the UK. These are important as they can influence whether the Bank of England (BoE) will change interest rates. On Wednesday we see the latest UK unemployment figures, which are also a key release showing how the economy is doing. On Thursday, we have retail sales figures and the latest decision on interest rates from the Bank of England.

I think it's highly unlikely that they will cut rates again, however they will release the minutes of the meeting, what was discussed, and hold a press conference afterwards in which Mark Carney, the BoE governor, will answer questions. It's this press conference that is important. If Carney hints at further interest rate cuts or more Quantitative Easing before the end of the year, it's likely the Pound will weaken and could pull exchange rates lower. Much of course will depend on the preceding data, as if this weeks releases that I've outlined above are positive, perhaps the Pound may recover some of last week's losses.

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