Sterling expected to lose further ground vs the Euro this year

Some form of hope for Sterling

Forecasts for the Pound to Euro rate have been downgraded by Dutch bank ING recently, as they believe in the short term future the Pound is likely to drop in value.

The Brexit process has become a lot more tense through July, as the UK’s Prime Minister, Theresa May has put forward her plan and it hasn’t been met particularly well by the Government or the EU leaders for that matter. May had called her entire cabinet to her Chequers country residence to draw up the plan but since it’s release, a number of key personnel have resigned including Foreign Secretary Boris Johnson and Brexit Secretary David Davis.

This is likely to continue to place uncertainty on the Brexit process, and with time running out to clear up the plan and agree terms with the EU I can understand why ING would downgrade expectations for the Pound in the short term future.

Lloyd’s Bank are also not ruling out a move for GBP/EUR down towards the lows of 1.02. The lowest the pair have been recently is 1.07 and with the pair currently trading around 1.11 to 1.12, it has some considerable distance to drop before reaching those levels again.

One topic that had been propping up the Pound was hopes of an interest rate hike from the Bank of England. These hopes still remain with many economists expecting to see a hike next month, although should that now not take place I think we can expect to see the Pound drop in value.

Data is light throughout the rest of the week, especially out of the UK. One of the main potential market movers for the GBP/EUR pair will be this Thursday’s European Central Bank (ECB) interest rate decision and monetary policy statement. Although no interest rate changes are expected the comments afterwards could impact rates depending on what’s said, so it’s definitely worth tuning in to the markets around lunchtime on Thursday.

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