The GBP EUR exchange rate fluctuated this week after the European Central Bank (ECB) predicted that bailing out Italy’s third largest bank, Monte dei Paschi (MPS), could cost more than initially expected.
Pound Euro (GBP EUR) Volatile as ECB Predicts MPS Bailout Will Rise
The Pound Euro (GBP EUR) exchange rate has becoming increasingly volatile following a report from the ECB that it expects the cost of bailing out Monte dei Paschi to rise.
The Italian government is currently planning a €6.5bn rescue package for the bank but the ECB has warned this may not be enough after it estimated that MPS’s capital shortfall is actually around €8.8bn, significantly higher than the €5bn it had been seeking from private investors earlier in the month.
However, market concerns were alleviated by comments from a senior Italian Official that Rome was confident that the bailout would fit within the government’s €20bn bailout fund, saying;
‘Compared to the perimeter within which we designed the fund, as well as from the point of view of Italy’s public finances, this does not change much.’
Mortgage Data Weighs on Sterling (GBP)
The Pound stumbled today following the latest British Bankers Association Housing data, which reported that mortgage loans unexpectedly dropped from 40835 to 40659 in November, after expectations that it would rise to 41400.
Some economists also believe that this is a sign that the housing market will decline next year, with predictions that house prices could actually fall in 2017. Rising inflation and economic uncertainty may make consumers unwilling to make major property purchases over the next 12 months.
GBP EUR Exchange Rate Forecast: Nationwide to Release Housing Data Tomorrow
The GBP EUR exchange rate may slide tomorrow following the release of Nationwide’s latest UK House Price report, which is expected to show that prices fell from 4.4% to 3.8% in December, adding support to forecasts that Britain’s housing market may shrink in 2017.
Looking further ahead, the Pound is likely to come under increasing pressure over ‘Brexit’ as Prime Minister Theresa May’s plans to trigger Article 50 by the end of March remain unchanged and investors are likely to have to wait until at least February for the government to release its plans for splitting from the EU.
Current Interbank Exchange Rates
At the time of writing the GBP/EUR exchange rate was trending around 1.17 and the EUR/GBP exchange rate was trending around 0.85.
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