UK economic data published recently has helped Sterling Euro exchange rates break past 1.20 however all the releases have focused on data prior to the Brexit.
It won’t be until mid-August that we really find out how the UK economy has performed during this period and the likelihood is that the data will be rather negative as clearly foreign investment was lower in the run up to the EU referendum vote.
However, between now and then arguably one of the biggest events that could impact Sterling vs Euro exchange rates is that of the European banking stress tests due to take place on 29th July.
This could cause a rather large amount of volatility for GBPEUR exchange rates as if it proves certain banks fail then this could cause a big loss of confidence.
The stress tests include all European banks including those in the UK but I think we could see the Italian banking sector coming under pressure which could cause the Euro to weaken.
Indeed, the results are not published until Friday 29th July at 9pm UK time and the reason why this data release is coming outside of trading hours is that it could cause a lot of volatility hence the reason to publish it so late so the markets can take time to digest the information.
The Italian banks currently owe as much as €550bn with almost half of that to French banks so if the Italian banks fail the stress tests this could cause a loss of confidence on the continent and therefore we could see Sterling rising against the Euro.
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