BoE Stability Report Predicts 'Brexit' Challenges, GBP EUR Exchange Rate Fluctuates

November 30, 2016 - Written by Tim Boyer

STORY LINK BoE Stability Report Predicts 'Brexit' Challenges, GBP EUR Exchange Rate Fluctuates

The GBP EUR exchange rate has been increasingly volatile today after the Bank of England (BoE) released its latest Financial Stability Report.

Pound Euro (GBP EUR) Pressured by Brexit Uncertainty

The Pound Euro (GBP EUR) exchange rate suffered from fresh market concerns over 'Brexit' this morning as BoE Governor Mark Carney urged both the UK and the EU to fully consider their plans for when Britain leaves.

Carney warned that banks would need a transitional period in order to organise an exit from the EU and pressed Theresa May to provide more clarity on the 'Brexit' process so businesses could prepare, saying;

‘It is preferable that firms know as much as possible about the desired endpoint, what type of relationship would be there, and as much as possible, as early as possible, about the potential path to that endpoint.’

However Carney also warned against the European Union punishing the UK for leaving by cutting all ties with Britain in as he said;

‘The United Kingdom is effectively the investment banker for Europe…These activities are crucial for firms in the European Union economy, and it’s absolutely in the interest of the European Union that there is an orderly transition and that there’s continual access to those services.’

The comments were largely seen as a rebuttal to remarks from European Central Bank (ECB) President, Mario Draghi yesterday which suggested that The UK would be the ones to lose out in 'Brexit'.

The report did little to improve Sterling sentiment however as it indicated that the general outlook for the UK’s economy following the 'Brexit' vote would remain challenging. This was exacerbated by GfK’s Consumer Confidence survey which dropped from -3 to -8 in November, its lowest levels since July immediately after the UK’s vote to leave the EU.

Euro Strengthened by Impressive Eurozone CPI Data

Euro (EUR) exchange rates were bolstered by a slight rise in Eurozone inflation as the CPI figures climbed from 0.5% to 0.6% as forecast, reaching its highest levels since April 2014.

The rise in growth reflected well on the single currency as the sign of continued growth in inflation may help ECB from to reassess the extent of its plans to extend quantitative easing programme, as it targets a 2% inflation rate.

GBP EUR Exchange Rate Forecast Manufacturing PMIs Tomorrow

The GBP EUR exchange rate may rise tomorrow if Markit reports a rise in the UK’s latest Manufacturing PMI. Investors currently predict that November’s PMI will remain unchanged at 54.3, so even a slight rise could help bolster the Pound.
Meanwhile it is a similar story for the Eurozone’s own manufacturing PMI as an unexpected rise from 53.7 could provide some lift for the Euro.

The Eurozone will also release its latest unemployment figures on Thursday, which are expected to show that levels remained at 10% in October, however should this year’s downtrend continue the Euro may suffer.

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TAGS: Daily Currency Updates Euro Forecasts Euro Pound Forecasts