Tuesday, 20 June 2017

Pound falls but remains relatively flat vs the Euro

Pound falls on Interest Rate News


Sterling/Euro rates have slipped to the lowest we've seen for a week or so, after the Bank of England governor said this morning that they would not be raising interest rates any time soon. There had been some speculation that they would look to increase the base rate due to rising inflation.

2 members of the BoE's monetary policy committee did vote for a hike last week, but the majority decided to keep rates on hold. It's probably the case that due to slowing wage growth and concerns about what effect Brexit would have on the economy that swayed their decision.

With interest rates likely to remain at a record low of 0.25% for the foreseeable future, the Pound fell due to the fact only a very low return is on offer for investors.

Political Uncertainty & Brexit


Elsewhere, 10 days after the election Theresa May is still to formally announce that they will form a government with the backing of the DUP. Brexit negotiations also started yesterday, but nothing much has happened so far other than initial soundbites from the UK and EU sides that they both want to agree a deal. In the coming weeks, it will become clearer how these negotiations are going, and any sign that they are strained will likely send the Pound lower.

So all in all since my last post, much remains the same. Political uncertain, Brexit uncertainty, and a weak Pound. The current period for Sterling/Euro rates is the least volatile I can remember for quite some time, with the GBP/EUR rate remaining around the €1.14 level. I don't expect this calm to continue however, and whether the Pound/Euro rate will go up or down in the coming weeks or months is going to be almost entirely driven by how the Brexit talks go.

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