- Brexit uncertainty diminishes
- UK inflationary figures showing improvement
- ECB Interest decision on Thursday
- UK not to withdraw from the EU this year
This morning’s breaking news follows a government lawyer telling London’s High court that Article 50 will not be triggered this year. Whilst this news does prolong elements of uncertainty its becoming more apparent that Theresa May could be looking at a ‘hard’ Brexit. Hard being a complete withdrawal from the EU and any form of membership, and a return to trade agreements elsewhere. Australia are the first country to put forward their support for the UK by offering a trade agreement. How long will it be until the rest follow suit?
The Brexit is looking less and less doom and gloom and this morning’s inflationary figures provide hope to the UK economy in a time of complete disarray. CPI figures this morning came in at 0.5%, 0.1% higher than anticipated although it could well be too early to determine the fate of the British economy.
Mark Carney’s decision to keep interest rates on hold may well be his most tactical move yet, his ‘wait and see’ approach has left Mario Draghi with very little manoeuvring capabilities. His Quantitative Easing programme has had very little impact on the economy as of yet, and with interest rates at 0%, the option of negative rates could be on the table.
How will this impact GBP/EUR exchange rates this week?
Thursday’s ECB interest rate decision and monetary policy update will be watched with scrutiny off the back of Mark Carney’s interest rate decision. Will the ECB cut rates into negative territory? It’s unlikely they will, biding time will likely be their agenda. But how will Draghi react to the issues in Italy? Will he turn a blind eye to the economic concerns in the EU?
I suspect it won’t be long until the ECB need further stimulus for the economy, inflation has been almost stagnant in the single market and the fallout of Brexit will not likely aid the situation in months to come.
Pay close attention to the Euro monetary policy update on Thursday, any signs of further stimulus or rate cuts will likely have negative implications on the Euro. We may see GBP/EUR exchange rates hit the 1.22-1.23 mark.
