Tuesday, 15 November 2016

Why has Pound/Euro rate fallen?

Sterling had held on to last weeks gains yesterday, however this morning we've seen the rate drop from 1.1650 to just below 1.15. The reason for the fall is a leaked memo reported by the BBC and the Times, that warns there is no proper Brexit strategy, and divisions in the cabinet with regards to how to proceed. It also said that 30,000 more staff may be needed.

The government have said they don't recognise the claims and don't know where the report came from. The markets have reacted however and sold the Pound, weakening it in the process and pulling exchange rates lower. If the memo turns out to be a fake, we may see rates recover, but regardless of its authenticity, it does demonstrate how complex the process of leaving the EU is going to be.

In regards to the Pound/Euro rate, it's not that much of a drop though, and considering a week ago GBP/EUR rates were in the €1.10's, the current levels are still much better than they have been.

Also this morning we have just had Inflation Data and Retail Sales information released from the UK. Retail Sales were worse than expected, and inflation numbers were a mixed bag, with some measures higher than forecast, but the key CPI figures which are the most important, were lower than thought and reduce the case for a rise in interest rates any time soon. At the time of writing, GBP/EUR has dipped just below the €1.15 mark.



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