The pound to Euro exchange rate has rallied in recent days higher despite recent commentary suggesting there could be UK interest rate cut as soon as January 30th. The conversation has moved away from Brexit and on to interest rates even though the 31st January departure date fast approaches. Expectation of a rate cut has risen sharply with interest rate futures now pricing in the prospect of a cut at 70%. This is a steep increase considering it was running at about 10% the week prior.
The pound starts the week lower with GBP vs EUR exchange rates sitting just above 1.17 in a week that could be crucial on the back of UK economic data. This Friday will see flash Purchasing Managers Index data for January for the UK’s heavily lead services sector. Expectation is for small pick up although anything that disappoints could put pressure on the pound if it reinforces the argument that the Bank of England should cut interest rates.
As things stand we know that two members Michael Saunders and Jonathan Haskel voted for rate cut in November. It means that if the likes of Governor Mark Carney, Silvana Tenreyro and Gertjan Vlieghe also sway to cut rates then there will eb majority of 5-4. The combination of low inflation last week and weak retails sales numbers which were released on Friday are likely to tempt the Monetary Policy Committee to make the move and cut rates.
Brexit Winners and Losers
It comes at a time when Chancellor Sajid Javid has said to businesses that they have had three years to prepare for Brexit and suggested that there will be some winners and some losers. There is also uncertainty as to whether Britain will start trade negotiations with the EU or US first, something that is likely to have some bearing on the future trade talks. After 3 ½ year since the EU referendum the trade talks will finally be able to commence after 31st January when Britain will have formally left the European Union. Those with pending requirements either looking to buy or sell Euros would be wise to consider their options at this stage with important changes in the very near future.
To learn more about factors influencing GBP/EUR exchange rates for an upcoming currency transfer, please contact myself, James Lovick using the form below.