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Hard Brexit Fears Continue to Undermine GBP/EUR Exchange Rates

October 11, 2016 - Written by Toni Johnson

Fears over the impact of a hard Brexit have continued to weigh on Pound Sterling to Euro exchange rate today, although developments in the Eurozone have kept the pairing unstable.

Further Warnings against Hard Brexit Undermine Pound Sterling (GBP) Exchange Rates



A leaked Treasury report suggests that the UK could face annual public sector receipts that are lower by -£66 billion per year after 15 years of a hard Brexit.

Pound Sterling exchange rates were weakened further after the Bank of England’s (BoE) Anil Kashyap warned that a hard Brexit could have ‘non-trivial’ fiscal consequences, leading to ‘a hole in the budget’.

Two senior bankers have commented that they may move aspects of their operations out of the UK in the event the government does exit the single market. James Bardrick of Citi Bank stated;

‘How do we and when do we start making decisions ... knowing the plan is ready to go ... it could be in the first quarter of 2017.’

Meanwhile, Morgan Stanley CEO Rob Rooney explained;

‘It really isn’t terribly complicated. If we are outside the EU and we don’t have what would be a stable and long-term commitment to access the single market then a lot of the things we do today in London, we’d have to do inside the EU 27.’

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The Brexit decision has also partly been blamed for pushing the UK out of the top 10 in the World Energy Council’s global energy ranking for the first time, thanks to creating an uncertain environment that works to dissuade investors.

Eurogroup Greek Bailout Approval Boosts Euro (EUR) Exchange Rates; Irish Government Defiance over Tax Causes Jitters



The Eurogroup approved the next tranche of Greek bailout funding today, boosting Euro exchange rates thanks to market relief that Athens had managed to implement the required reforms.

While a technical hitch will delay around half of the payment by an estimated two weeks, Greece will nonetheless receive the full €2.8 billion.

Although this has improved market sentiment, the Euro to Pound Sterling exchange rate has experienced some moments of weakness, even temporarily dipping into negative territory earlier during the session.

The Irish government’s defiant stance over its current low levels of corporation tax has potentially set it on a collision course with EU officials intent upon cracking down on corporation tax.

Ignoring the recent ruling that ordered the Irish government to collect €13 billion in unpaid tax from Apple after the EU found the company had been given selective treatment, Irish Finance Minister Michael Noonan claimed;

‘Ireland’s 12.5% corporation will not be changed and nobody in Europe or anywhere else is asking for it to be changed.’

GBP/EUR Exchange Rate Forecast; Eurozone Industrial Production Able to Overrule Market Sentiment?



There is no data on the UK calendar tomorrow likely to impact Pound Sterling exchange rates; given the current attitude of the markets this would probably be true even if there was high-impact releases scheduled for publication.

German wholesale price index figures and Eurozone industrial production statistics are set for release tomorrow. Eurozone industrial output is expected to have expanded supportively on the month by 1.5% and by 1% on the year. If these forecasts are met, the Euro may strengthen.
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