Multi-month lows for GBP/EUR after ECB rate decision

Thursday wasn’t the best of days for the pound as a combination of factors sent GBP exchange rates to new lows.

GBP/EUR plummeted from €1.1307 to €1.1141, GBP/USD left highs of $1.3024 to trade in the region of $1.2935, GBP/AUD struck a new 3 ½ month low of AU$1.6275, GBP/NZD edged down from NZ$1.7738 to N$1.7463 and GBP/CAD closed the day trading around C$1.6329.

Is more GBP volatility ahead? Keep scrolling to find out...

What’s been happening?

Fairly upbeat UK retail sales figures weren’t enough to give the pound a lift on Thursday, with the British currency instead racking up some significant losses on the back of fresh Brexit fears.

Amid rumours that the UK and EU are clashing over the ‘exit bill’, British trade minister Liam Fox indicated that the UK could survive without a post-Brexit trade deal. His comments were taken to mean that a hard-line stance might be adopted in negotiations.

Fox stated; ‘We don’t want to have no deal. We can of course survive with no deal, we have to go into a negotiation with those on the other side of the table knowing what we think.’

The pound fell below $1.30 against the US dollar as a result of Brexit concerns and spiralled to an 8-month low against the euro. GBP/EUR losses were also the result of the European Central Bank’s (ECB) latest interest rate decision.

Policy was left unchanged, as expected, but remarks from ECB President Mario Draghi sent the euro soaring.

According to Lloyds; ‘In the subsequent Q&A session, a mostly dovish performance by President Draghi failed to keep the euro down for long, despite his insistence that an unwarranted tightening of financing conditions is the “last thing” the ECB wants. Markets, in particular, focused on his comment that a discussion on the QE programme will take place in the “autumn”, which could be as soon as the next meeting in 7th September. The precise date, however, was kept vague, so it could be in October or as late as December.’

What's coming up?

With the weekend fast approaching, there are a few economic reports to be aware of today.

The UK is set to publish its public borrowing figures. Borrowing is believed to have fallen in June, and such a result could lend the pound some much needed support.

The GBP/CAD exchange rate could also recoup some of this week’s loses if Canada’s Consumer Price Index reveals a slowing in the pace of inflation. Economists have forecast that inflation eased from 1.3% to 1.1% in June.

Poor Canadian retail sales figures could also put the 'Loonie' under pressure.

Looking ahead to next week, the main UK data to be aware of is the nation’s second quarter growth estimates and the GfK consumer confidence survey.

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.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.