Losses Forecast for Pound Sterling Euro Exchange Rate GBP EUR as Constitutional Concerns Grow

October 28, 2015 - Written by David Woodsmith

STORY LINK Losses Forecast for Pound Sterling Euro Exchange Rate GBP EUR as Constitutional Concerns Grow

Pound Sterling Exchange Rate Held Firm Yesterday despite Weaker-than-Expected GDP

The Pound Sterling (currency : GBP) held its own during yesterday’s session in spite of a distinctly below-par set of UK Gross Domestic Product figures, published during yesterday morning’s European equities session.

However, the official numbers, which pointed to a pronounced slowdown to 0.5% in the pace of expansion in the British economy during the three months to the end of September, were not the only factor weighing down Sterling on the day.

Forex News Today: Britain Faces 'Constitutional Crisis' after Lords Reject Tax Credit Cuts

The decision by the House of Lords to reject the Conservative government’s proposals for scaling back spending on tax credits has prompted talk that Britain is facing a ‘constitutional crisis’.

The UK political system is one large grey area by dint of the fact that there is no over-riding written constitution governing it.

Various conventions have evolved over the centuries in response to this vacuum, one of which being that the unelected upper house does not over-ride decisions made by the elected MPs in the House of Commons on matters of government expenditure and taxation.

Many Conservative MPs, (and some opposition members brave enough to speak out), believe that the Lords overstepped their remit in voting down the government’s proposals for reducing in-work benefits on Monday.

George Osborne, the Chancellor of the Exchequer, menacingly stated yesterday that the House of Lords would be ‘dealt with’ and political analysts suggest that this action may take the form of up to 100 new Conservative peers being created to stop such perceived insouciance in the future from the Upper House.

If this leads to a constitutional stand-off, then it appears likely that the Pound Sterling would incur sustained losses against the other major global tenders in the currency markets.

GBP/EUR Conversion Rate Could hit Low of 1.3346, GBP/USD Predicted to Drop through 1.5000.

A renewed move against the Pound would have the potential to send the Sterling euro exchange rate down to its 8-month low of 1.3346 GBP EUR which it touched off earlier this month.

Meanwhile, concerns about the ability of the UK government to effectively pass legislation on financial measures has the potential to send the Pound Sterling US Dollar exchange rate down through the 1.5000 GBP USD threshold for the first time since the third week of April.

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TAGS: Pound Dollar Forecasts Pound Euro Forecasts Pound Sterling Forecasts