There will be some key events next week for Euro buyers to be aware of, with a potentially jumpy start for GBP/EUR as trading opens for the week – first in Asia, then in Europe as markets open from the weekend slumber.
The key point will be how Asian and European markets will react to the stress tests conducted on the top 51 high street institutions in Europe over the weekend.
The results were a mixed bag, with the Eurozone posting the worst results while the UK seemed to post ‘above average results’ with a few poor performers. The main one of these was RBS, which was found to lose 7.5% of its capital immediately should a recession or debt crisis suddenly hit the UK economy.
Given that the likelihood of a recession has increased in the UK following the jarring effect of a leave vote in July 23rd’s EU referendum, even this small portion of poor news was enough to make the Pound the marginal loser in its exchange with the Euro heading into the weekend.
Now all eyes will be looking forward to the UK’s interest rate decision on Thursday. Given this news, will they feel compelled to intervene? Or will the more positive news from the likes of Lloyds, HSBC and Barclays following the stress tests give them some breathing room to wait until September before taking the drastic decision to cut interest rates or introduce a fresh bout of quantitative easing?
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