The Euro has seen a minimal decline against the Pound today, but may see progressive gains further ahead on Eurozone budgetary news.
The Pound’s gains may conversely fall away in the near-term, depending on the UK government’s post-Brexit predictions.
Is Euro Volatility ahead on Talk of Common Eurozone Budget?
The future integration of the Eurozone could have an increasing impact on the Euro going ahead, depending on how rapidly plans are put into action.
A recent Eurogroup meeting has seen Eurozone finance ministers discuss the possibility of a common budget across the currency bloc.
Known as ‘fiscal capacity’, this shared budget could be used to pay for any unexpected crises or disasters, as well as eliminate the need for a vast, annual budget meeting.
Discussing the situation after the meeting was Klaus Regling, Managing Director of the European Stability Mechanism;
‘It was a very controversial debate, [there were] many ideas and the question is where one can find common ground.
It would be a question of generating a pot of money either through rainy day funds or contributions from national unemployment schemes.
Once we have a pot of money, it would not be used every year, it would be used when there is a problem in order to prevent a bigger crisis from developing. It would be a fund that would be replenished, a revolving fund’.
If a universal Eurozone fund seems to be getting beyond the discussion stage, the Euro could appreciate from optimism about greater future stability.
Pound Losses possible if Government’s Brexit Study Predicts Volatility
The Pound may face difficulties in the future, if the government’s report on the effects of Brexit is negative.
The Conservative Party is expected to publish studies on the forecast impacts of Brexit, specifically what will happen to the economy.
These are due out by Tuesday evening at the latest, according to a deadline imposed by House of Commons Speaker John Bercow.
Government ministers have previously rejected calls to publish the documents, stating that these could weaken the UK’s hand in Brexit negotiations.
Assuming that the reports are published on time, they could end up weakening the Pound if they suggest major economic damage from even a ‘Soft Brexit’ deal.
The Pound may also decline if the government misses the deadline for publication; this is because such delays would imply that the reports might be extremely negative.
It could be the case that traders jump to this conclusion, leading to a GBP/EUR decline either way.
Recent Interbank EUR GBP Exchange Rates
At the time of writing, the Euro to GBP (EUR GBP) exchange rate was trading at 0.8803 and the Pound to Euro (GBP EUR) exchange rate was trading at 1.1358.
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