The pound continues to hold the upper ground against the Euro after the developments last week from the European Central Bank. Rates for GBP EUR are sitting at 1.14 after the Euro dropped sharply when the ECB confirmed it will finally complete its asset purchasing scheme in the final quarter of this year. The Euro weakened further after the ECB stated that it will not look to raise interest rates until beyond December 2019. The markets had assumed that the central bank would follow more closely in the footsteps of the US and UK but that has been completely put back under a very strong dose of forward guidance.
Economic data is light this week for the UK although focus will move to Thursday’s interest rate decision at the Bank of England. Although there is not expected to be any change in rates any suggestion that there could still be a hike in August is likely to help see the pound rally. Retail sales bounced higher last week which was a much needed boost for the British economy. One set of data though is unlikely to persuade the Bank of England to take action now. In my view though the uncertainty on how Brexit will ultimately look will create a more cautious mood within the Monetary Policy Committee.
Before the meeting on Thursday though the ongoing ping pong of the Brexit withdrawal bill is likely to direct the price of sterling. The House of Lords have discussed the bill today and it will go back to the House of Commons for another vote on Wednesday. This could be a big market mover ahead of the EU summit at the end of the month.
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