Wednesday, 5 October 2016

GBP/EUR rates recover slightly, but will it last?

The Pound has recovered a little today. After starting the London session at around €1.13 vs the Euro, we have seen Sterling steadily rise throughout the afternoon, and we're now just below €1.14. While this is good, it's still significantly lower than it has been, and still not far from a 5 year low.

Tomorrow will be key for the Euro as the European Central Bank give an overview of the financial market, economic and monetary developments. It's followed by a summary of the discussion on the economic and monetary analyses and on the monetary policy stance.

This could affect GBP/EUR rates as the markets will be looking for clues as to whether they will start to wind up their stimulus measures in the coming months. If they do hint at this, then the Euro could strengthen and start sending Pound/Euro rates lower again. If they don't and their comments hint that they may just continue treading water, then the Euro may weaken pushing rates higher.

The general feeling however is that GBP/EUR rates are likely to head lower in the coming months, with many large banks forecasting a continued decline of this currency pair. Any further developments about how the UK intent to negotiate our new position with Europe could also come at any time, so expect exchange rates to remain volatile.

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