Sterling tailed off towards the end of last week after a prominent think tank, the National Institute of Economic and Social Research (NIESR) warned about the potential negative effects of a no-deal Brexit. I expect similar concerns to dominate the headlines following the Autumn Budget this afternoon as the Chancellor of the Exchequer Philip Hammond will be speaking. He’s scheduled to speak around 3.00pm, so those of our readers following the pound’s value at the moment should pay close attention to this event.
GBP/EUR rates driven by Autumn Budget
If Philip Hammond adopts a dovish attitude as I predict he will, I think we could see the pound lose value against the euro. There has been talk in the papers over the weekend suggesting that if the UK departs the EU without a deal in place, there will be a need for an increased Budget. How Hammond plans on obtaining this could put pressure on sterling’s value.
Although I expect the Budget to be the main driver of the pound’s value this afternoon, it’s also worth following the euro’s value and euro related news as that too could impact GBP/EUR.
Will German elections impact GBP/EUR rates?
Over the weekend there were some poor regional election results in Hesse and Bavaria for German Chancellor Angela Merkel’s Christian Democrats Party, and its Baveria-only sister party. This performance by the Christian Democrats is their worst performance since 1966 and Angela Merkel has since stated that she with be completely withdrawing from politics after 2021. This will bring an end to her dominance within European politics, and she believes that national politics have had a big influence on the results in the regional elections from the weekend.
The news hasn’t dramatically swayed pound to euro exchange rates, but I think an upheaval within European politics could put pressure on the euro’s value especially if the more populist parties continue to make gains in the upcoming months.
Bank of England interest rate decision
Later in the week the Bank of England will give their interest rate decision with the markets expecting no change. The comments afterwards from BoE Governor Mark Carney will be followed closely, so expect any references to monetary policy to result in movement in the GBP/EUR exchange rate.
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