British Steel Industry under Threat as Tata Steel Announce Plans to Sell UK Interests
News that the Indian conglomerate Tata Steel intends to sell its UK manufacturing businesses, including the Port Talbot plant, has seen the Pound weaken and the government come under heavy criticism. Tata Steel currently employs 15,000 UK staff and the decision to sell their British interests comes after the board met yesterday to decide the fate of the works at Port Talbot, which is rumoured to be losing -£1million per day.
MP for Port Talbot, Stephen Kinnock, has claimed that Tata Steel made the decision after being unhappy that the British government were not making more effort to support the British steel industry. Leader of the Labour party, Jeremy Corbyn, has written to David Cameron, asking the Prime Minister to recall parliament in order to debate the government’s response to the crisis. Business Secretary Sajid Javid has also announced that he will cut short a trip to Australia in order to return to the UK to help deal with the current situation.
Yesterday…
GBP/EUR Remains Strong, Nicky Morgan Warns ‘Brexit’ will Harm Young People Most
In prepared remarks, Education Secretary Nicky Morgan has warned that a break away from the European Union would be detrimental to Britain’s young people. The speech is aimed at persuading young people to vote in the referendum, as research has shown that they are generally pro-EU but less likely to go to the polls.
Earlier…
After firming since the start of the session, the Pound Sterling to Euro (GBP/EUR) exchange rate’s position looks to be under threat. The Bank of England’s (BoE) Financial Policy Committee (FPC) has warned that a ‘Brexit’ could trigger a credit crunch in the UK. Meanwhile, the Euro is putting on a mixed performance as traders await a public appearance by US Federal Reserve Chair Janet Yellen.
Bank of England Issues Starkest ‘Brexit’ Warning yet, Undermining GBP/EUR Exchange Rate Gains
The FPC have released a new statement today in which it warns that a ‘Brexit’ could cause a credit crunch. As well as predicting that the run up to the referendum could see further Pound Sterling depreciation and an increase in the cost, coupled with falling availability, of finance for UK borrowers, the FPC claims a split from the EU could see foreign investment suffer.
According to the statement, ‘The financing of [the] deficit is reliant on continuing material inflows of portfolio and foreign direct investment. Those flows have contributed to the financing of the public sector financial deficit and corporate investment, including in commercial real estate. Heightened uncertainty could test the capacity of core funding markets at a time when the liquidity of these markets has shown signs of fragility across advanced economies.’
Also contributing to the cooling of Pound Sterling appetite is the latest poll from Ipsos, which has revealed that the ‘Remain’ camp’s 54% lead has shrunk to 49%, while support for the ‘Leave’ camp has grown from 36% to 41%. However, when adjusted for turnout, the poll reveals just how close the ‘Brexit’ battle has become, with votes for ‘Remain’ outpacing those for ‘Leave’ by just 2% at 48%.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading in the region of 1.2741.
Eurozone Loan Growth Figures Trigger Cautious Euro to Pound Sterling (EUR/GBP) Exchange Rate Uptick
Sentiment towards the Euro remains weak overall today, with the common currency failing to make significant gains against any of the major currencies other than the weakened commodity-correlated Australian Dollar (AUD) and South African Rand (ZAR). However, traders have reacted positively to figures showing a mild uptick in lending across the Eurozone.
According to the latest figures from the European Central Bank (ECB), the rate of loans approved grew 1.1% year-on-year (YoY), an acceleration of 0.3% on January’s figures, while household and business credit also saw a similar uptick, rising from 0.6% at the beginning of the year to 0.9% in February. The ECB will welcome the figures as proof that their stimulus package is working, although the data doesn’t chronicle the impact of the latest round of monetary policy loosening announced on the 10th of March. However, the M3 money supply, a measure of the overall money supply in the Eurozone, continued to grow steadily at 5%. An acceleration of this figure would be preferable for the central bank, as an increase in monetary supply suggests heightening inflationary pressures.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trading between 0.7835 and 0.7873.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Fed’s Janet Yellen could Weaken Euro with Policy Comments
With no data left for either the UK or the Eurozone, traders will be turning their attention to an upcoming speech from Chair of the US Federal Reserve, Janet Yellen. Some are already anticipating that Yellen will hint at forthcoming interest rate hikes, which could weaken the Euro on the prospect of widening policy divergence between the Fed and the ECB.
However, the fallout from today’s ‘Brexit’ developments, including the likely backlash against the FPC’s latest statements from ‘Leave’ campaigners, could weaken Pound Sterling.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading between 1.2692 and 1.2761.
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