GBP boosted as Juncker leaves door open for UK to re-join EU post-Brexit

The latest speech from a Bank of England (BoE) official did nothing to dispel the gloom surrounding the monetary policy outlook for the UK, but comments from Jean-Claude Juncker gave the pound a boost yesterday.

The pound is on soft form this morning. GBP/EUR is down -0.2% to €1.1330, while GBP/USD is flat at US$1.3831. GBP/AUD is also stuck at opening levels and is trending at AU$1.7341, although GBP/NZD has fallen -0.2% to NZ$1.8964. GBP/CAD is stuck at C$1.7202.

Read on to find out how the UK could re-join the EU post-Brexit, according to Jean-Claude Juncker…

What’s been happening?

Markets were disappointed with the speech from Bank of England (BoE) official Michael Saunders yesterday, but the latest commentary from EU officials drew traders back to the pound in the afternoon.

Saunders gave optimistic forecasts for the UK economy, stating that he believed unemployment would fall faster than most economists, including those at the BoE, expect, which would push wage growth significantly higher.

However, he also stressed that interest rates needed to be hiked gradually – an idea in keeping with the dovish tone taken by the Monetary Policy Committee (MPC) at the latest meeting – so the odds of monetary tightening were not improved following his speech.

But the pound still saw gains against the euro and US dollar, as EU leaders once again suggested there was a way back into the Union for the UK.

Leaders have seized on Nigel Farage’s recent comments that a second referendum on Brexit might be necessary, with Jean-Claude Juncker yesterday reminding the UK that it could use Article 49 to re-enter the European Union after Brexit.

Meanwhile, both the euro and US dollar suffered as the pound’s appeal overshadowed them.

Eurozone inflation data showed the expected hold at 0.9%, which is under half the rate of price growth the European Central Bank (ECB) wants to see before it thinks about tightening interest rates.

The US dollar was on hold ahead of speeches from Federal Reserve officials Charles Evans and Loretta Mester, both of which had the potential to undermine or strengthen bets of monetary tightening in March.

What's coming up?

The only UK domestic data appearing on the economic calendar today has already been released.

The latest RICS house price balance has helped to reduce fears over the state of the UK’s housing market after rising to 8%, when forecasts were for a drop from 0% to -1%.

This does not appear to have had much of a positive impact on the pound, which suggests Sterling could spend the day responding to the latest sentiment or developments surrounding Brexit.

Although there are no eco-stats from the Eurozone due today, speeches from several European Central Bank (ECB) officials in Frankfurt could alter the monetary policy outlook and create volatility for the euro.

US housing starts and building permits data, the Philadelphia Fed business outlook, and the initial and continuing jobless claims figures are also due for release this afternoon, which could generate turbulence for the US dollar.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.