Referendum Forecast Result Holds Back the Pound Sterling (GBP) Today

April 21, 2016 - Written by Ben Hughes

STORY LINK Referendum Forecast Result Holds Back the Pound Sterling (GBP) Today

GBP has been unpredictable recently, having risen in the face of negative economic announcements that arrived earlier.

Euro (EUR) Exchange Rates Advance as Draghi Avoided Jawboning

The euro (currency : EUR) was provided with a surprise boost from European Central Bank (ECB) President Mario Draghi earlier today. Following last month’s monetary policy announcement, which saw the ECB cut its headline interest rate and increase Quantitative Easing, the losses which followed for the shared currency were curbed by Draghi’s suggestion that this would be the final bout of policy loosening from the euroland central bank.

The ECB President, who is keen to see a weaker local currency, appeared visibly annoyed after his ‘mis-speak’ and many analysts anticipated a strong bout of trash-talking of the euro from Draghi today. However, this failed to materialise and Draghi’s words this afternoon, which forecast elevated levels of eurozone inflation for H2 2016, were broadly supportive to the single currency.

The Pound Sterling euro exchange rate spiked to as high at 1.2731 GBP EUR in the lead-up to Draghi’s press conference, but a short time ago was trading back down in the mid-1.2600s.

EU Referendum Uncertainty to Weigh Heavily on GBP Exchange Rates

Meanwhile, looking at the bigger picture, most FX insiders feel that Sterling will struggle to record any meaningful gains against the other sixteen most actively traded currencies during the long lead-in to the UK’s European Union In / Out Referendum, which takes place on 23rd June. More than once during the protracted period of campaigning, neutral observers have asked which side erstwhile UK Prime Minister Margaret Thatcher would have supported in the vote.

Thatcher successfully renegotiated the terms of the UK’s relationship with Europe during her tenure as Prime Minister, but was a noted Eurosceptic on many fronts. Having passed away just over 3 years ago, we will never know for sure, but Thatcher’s now famous Bruges Speech to the College of Europe provides heavy hints on what her line of thinking would have been.

The then-UK leader observed in the speech that, ‘the European Community belongs to all its members. It must reflect the traditions and aspirations of all its members. And let me be quite clear. Britain does not dream of some cosy, isolated existence on the fringes of the European Community. Our destiny is in Europe, as part of the Community. That is not to say that our future lies only in Europe, but nor does that of France or Spain or, indeed, of any other member. The Community is not an end in itself. Nor is it an institutional device to be constantly modified according to the dictates of some abstract intellectual concept. Nor must it be ossified by endless regulation.’

Given the federalisation of the euro area which has taken place since Thatcher delivered the speech in September 1988, many political analysts forecast that, if Thatcher were still with us, her vote would go to the ‘Leave’ campaign.

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TAGS: Euro Forecasts Pound Euro Forecasts Pound Sterling Forecasts