GBP EUR Exchange Rate Tumbles as Mark Carney Faces Grilling

October 25, 2016 - Written by John Cameron

STORY LINK GBP EUR Exchange Rate Tumbles as Mark Carney Faces Grilling

The GBP EUR exchange rate has plummeted this afternoon after trading relatively flatly earlier in the day as ‘Brexit’ uncertainty was counteracted by market fears that the Eurozone may be facing further monetary easing from the European Central Bank (ECB).

Pound (GBP) Exchange Rate Volatile as Carney Set to Face House of Lords

The Pound (GBP) Euro (EUR) exchange rate has been fluctuating today as Bank of England (BoE) Governor Mark Carney is set to face the House of Lords Economic Affairs Committee on the economic consequences of ‘Brexit’.

Kathleen Brooks, the city director at City Index said that Volatility could increase depending on comments from Carney;

'If Carney voices concerns about the deteriorating relationship with the Government then this would be the worst outcome for the pound in our view, as the last thing an already Brexit-frazzled FX market needs now is discord between the UK authorities’.

There has been increasing discord between the British government and the BoE in recent weeks as the bank's quantitative easing programme has been attacked by Prime Minister Theresa May.

This has fuelled recent speculation that Carney may quit his post in 2018 causing market sentiment towards the Pound to drop as they fear the BoE may lose its governor in the middle of ‘Brexit’ negotiations.

Pound Euro (EUR) Pressured by Upbeat German Data

Sentiment towards the Euro has improved, with German economic data impressing investors for the second day running as the IFO institute released its latest business confidence report.

The business climate report posted better than expected figures as it rose to 110.5 over predictions of 109.6, while the business expectations data also surged reaching 106.1 as it beat forecasts that it would hold at 104.5 for the month of October.

The data has shown that confidence in the Eurozone’s biggest economy has largely recovered following the fallout from the UK’s unexpected ‘Brexit’ vote earlier in the year. The report helped to strengthen the single currency.

However the Euro’s gains were muted by reports that ECB President Mario Draghi may be seeking to increase monetary easing in December, which may help the Eurozone reach the economic targets that Draghi desires.

GBP EUR Exchange Rate Forecast: Pound to Fall Further as ‘Brexit’ Anxiety Mounts?

The Pound could fall further today following comments from UK Chancellor Philip Hammond who said that he would be willing to approve further QE if the BoE believed that more economic stimulus was necessary. He stated;

‘No request for quantitative easing has ever been refused, and I can’t see why it would be different in future.’

However the GBP EUR exchange rate may recover later following Draghi’s speech in Berlin, where he is likely to be grilled by German lawmakers on why the ECB continues its ultra-loose monetary policy as Eurozone inflation begins to rise.

Current Interbank Exchange Rates

At the time of writing the GBP/EUR exchange rate was trending around 1.11 and the EUR/GBP exchange rate was trending around 0.89.

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