The Pound has dropped by -0.2% against the Euro today and could fare worse in the future, depending on how markets react when Prime Minister Theresa May triggers Article 50.
The run-up to the Article 50 trigger has largely been obscured by Government struggles to amend or leave unchanged the Article 50 bill, which is currently moving through the House of Lords.
The latest vote has been considered another government defeat, with peers approving an amendment to give parliament a ‘meaningful vote’ on the final terms of Brexit. If this amendment is approved in the Commons as well, it could add more national economic security than the suspected ‘take it or leave it’ stance that the Government may take.
After the dust from the Spring Budget has settled, traders are likely to turn their attention back towards the Article 50 trigger. This will create a deadline of 2 years for the UK to leave the EU, but may be extended if negotiations drag on for longer than expected.
Due on or around March 15th, this event is likely to send the Pound tumbling, given that it represents an irreversible step into an eventual new future for the UK outside the EU.
Brexit negotiations may be fraught with difficulties and cause further losses for the Pound as they unfold, but the act of beginning Brexit itself is set to be the first knock on the long road to taking the UK out of the EU.
For the Euro, inflation rate figures are likely to remain key to future demand.
While the European Central Bank (ECB) is not forecast to suddenly turn pro-interest rate hike on Thursday’s monthly rate decision meeting, the ECB bears watching in the future after inflation rate figures are released.
Specifically, the final February Eurozone inflation rate stats are due on March 16th; the previous inflation rate flash showed a rise from 1.8% to 2% coming in the month.
If this is confirmed by the final figures then the ECB could change its stance towards monetary policy tightening, meaning that a Euro-boosting interest rate hike may eventually be put in the pipeline.
Recent Interbank GBP EUR Exchange Rates
At the time of writing, the Pound Euro (GBP EUR) exchange rate was trading at 1.15 and the Euro Pound (EUR GBP) exchange rate was trading at 0.86.
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