GBP EUR Exchange Rate Volatile as Market Uncertainty Increases Ahead of Carney Decision

October 24, 2016 - Written by Frank Davies

STORY LINK GBP EUR Exchange Rate Volatile as Market Uncertainty Increases Ahead of Carney Decision

The GBP EUR exchange rate slid slightly following today’s opening bell as negative market sentiment towards ‘Brexit’ dragged on the Pound, although the pairing later fluctuated as the European session continued.

Pound (GBP) Exchange Rates Unstable as Carney’s Future in Question

The Pound (GBP) had seen some increased volatility against the Euro (EUR) this morning as Bank of England (BoE) Governor Mark Carney’s future is uncertain.

Carney has been one of the few stabilising influences on the Pound since Sterling collapsed in June following the UK’s vote for ‘Brexit’. However he has faced political criticism in the past few weeks with former Justice Secretary Michael Gove blaming ‘experts’ such as Mark Carney for ‘wreaking all kinds of economic disasters’.

This comes as Carney is deciding whether to serve his full term to 2021 as Governor of the BoE or is he will leave in 2018 as originally scheduled, the uncertainty of which has been weighing on the Pound.

Euro Keeps Pound Pressured, GBP EUR Lower as PMI Data is better than Expected

The Euro was bolstered against the Pound this morning as October's Eurozone PMIs were better than expected. Markit reported that the Eurozone services PMI rose from 52.2 to 53.5, surging past forecasts of 52.4, while the manufacturing PMI jumped to 53.3 ahead of a predicted 52.7.

This was the largest rise for the two in ten months and reversed the recent downtrend in the composite PMI after a disappointing September.

Julien Lafargue, European equities strategist at JP Morgan said;

‘According to the flash PMIs estimates, after a difficult summer, the Eurozone is accelerating again at the start of the 4th quarter. Although we believe this would be premature, this might trigger renewed concerns about the ECB having to “taper” its quantitative easing in the coming months.’

Pound Euro Currency Pairing Forecast to Fall on BBA Warning

Further Pound Euro exchange rate shifts could be on the horizon.

The British Bankers' Association (BBA) has warned that large banks are preparing to relocate out of the UK early next year over ‘Brexit’ fears, causing a further drop in market sentiment towards the Pound over the UK’s decision to split from the EU.

Banks fear that they will lose coveted passporting rights which allows banks in the city of London to clear the Euro, should the government pursue a ‘hard Brexit’ in which access to the single market is traded from greater controls on immigration.

GBP EUR Exchange Rate Predictions: UK GDP Report Due Thursday

Investors will be looking towards Thursday’s British GDP report as an increase would likely see the GBP EUR exchange rate advance, although it may continue to be driven by ‘Brexit’ sentiment if the UKs GDP remains unchanged at 2.1% as expected.

The Euro may strengthen further against the Pound tomorrow as a small rise is expected across the board in Tuesday’s German IFO data.

Current Interbank Exchange Rates

At the time of writing the GBP/EUR exchange rate was trending around 1.12 and the EUR/GBP exchange rate was trending around 0.89.

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