Currency News from Currencies Direct

  • GBP/EUR drops despite Catalonian crisis, BoE in focus

    After hitting a nine-week high of €1.1427 on the 27th September, the GBP/EUR exchange rate took a tumble in October and currently trades in the region of €1.1150.

    On the other hand, EUR/GBP is in the region of £0.8966, with EUR/USD trending around US$1.1844 – right in the middle of the month’s trading range.

    What’s been happening?

    A disappointing run of UK PMIs and more signs of Tory infighting have combined to keep the pound steadily on the decline this month. Brexit negotiations continue to stall and Theresa May even went as far as telling Parliament that the UK should be prepared for a ‘no deal’ Brexit as a contingency. Bets of whether or not the Bank of England (BoE) will increase interest rates in November have also been fluctuating.

    The euro has had plenty to contend with as well. Catalonia voted overwhelmingly for independence during its referendum, and Spain imposed direct rule on the region when the Catalan leader refused to back down. The uncertainty surrounding the Eurozone’s second largest economy has kept the euro under pressure.

    What do you need to look out for?

    Catalonia will continue to be a focus for the euro, with any negative developments liable to send the euro lower.

    However, the European Central Bank’s 27th October monetary policy meeting will also be a key event. Markets are expecting officials to announce tapering to quantitative easing; if this happens the euro could rise.

    The US FOMC meets again this month. Markets are expecting no changes, but the meeting will be important nonetheless, as it will show whether or not a December rate hike is still likely.

    The Bank of England (BoE) isn’t due to gather until November, but speculation on whether or not the central bank will make any adjustment to borrowing costs is likely to be a main driver of GBP movement in the weeks ahead.

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