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Pound Battered by European Politics, Carney Comments, Brexit Saga

July 3, 2019 9:15 am | Modified July 3, 2019 9:15 am
EUR, GBP, INR, Politics, USD | BY Charlie Murray

Two key developments in terms of the top jobs in Brussels have served to provide some meaningful direction for the Pound Euro (GBP/EUR) exchange rate in recent trade. Separately, Mark Carney has once again cautioned over the deteriorating state of the global economy, suggesting that fiscal, as well as monetary stimulus, may be necessary to salvage growth. Gains by the Indian Rupee over Sterling (GBP/INR) ahead of Friday’s budget have also been notable.

Bank of England’s (BoE) Mark Carney Talks Down British Pound

The Pound sold off against the US Dollar (GBP/USD) yesterday as Mark Carney warned over threats to economies across the globe. Trade tensions and broad uncertainty over economic policy were highlighted as key risks that may require a degree of both monetary and fiscal stimulus, and despite the message being a global one, the market evidently used the news as a reason to sell Sterling.

Will New European Central Bank (ECB) Chief Mean More QE?

Developments in terms of nominations for senior European Union appointments being agreed provided some direction for the common currency yesterday. With International Monetary Fund  (IMF) Chief Christine Lagarde set to lead the European Central Bank once Mario Draghi departs later in the year, comments are circulating that her lack of experience as a central banker will see her take more policy direction from aides. That has the potential to include the Bank’s senior economist whose dovish bias has hinted at resuming asset purchases to boost economic growth. The Euro US Dollar exchange rate (EUR/USD) may have stabilised yesterday after recent falls, but further clarification of the likely policy outlook could leave the pair exposed again on the downside.

European Commission Presidential Nomination Weighs on British Pound Exchange Rate

Another key nomination yesterday was that of the next European Commission President. MEPs will be asked to confirm whether they want Germany’s Defence Minister, Ursula Von Der Leyen, to take the helm in a secret ballot to be held later today. Her views on Brexit are forthright, calling it ‘a burst bubble of hollow promises’, suggesting that fresh thinking on the UK’s attempt to divorce itself from the European Union is unlikely to transpire. This combination of certainty over next steps for the European Parliament, plus the fact it seems unlikely to cut the UK economy much slack, was sufficient to see the British Pound Euro exchange rate (GBP/EUR) lose a quick half cent and resume last week’s downward trend.

Why Did it Move? Pound Sterling to Indian Rupee (GBP/INR)

The British Pound – Indian Rupee (GBP/INR) exchange rate hit its lowest level in almost 18 months off the back of speculation over the content of Friday’s Indian budget. The growing consensus across the market that the government won’t lift borrowing targets is driving up bond yields, increasing demand for the Rupee as a result. Having traded as high as 88.60 early last week, GBP/INR has this morning traded as low as 86.60.

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