Pound to Euro Pair Punched by the Brexit EffectJesus
The referendum campaign and the subsequent decision of the British people to leave the European Union led to considerable controversy. Both within and outside the UK. The reaction from those supporting the outcome has been intense and divided. Are you part of this controversy?
However, there has been relatively little discussion about whether the decision was a good or bad one, for several reasons.
The pair GBP EUR shock and the shock got triggered by different economic circumstances, in which both markets went up and down rapidly.
The market has room to reprice BoE on Bremain bring forward the first great rate hike from more than thirty months from now to sometime early next year, which should push the Pound to Euro to 1.50 and above in the short term.
Below is our review for the shock in the following paragraphs.
The Shock of Leaving The European Union to UK Stocks Markets
The shock of leaving the European Union to UK stock markets is one that no one in Britain can forget.
The UK’s decision to vote to leave the European Union has come as a massive shock to markets which had traded notably higher ahead of the release of results on the assumption the Remain vote would win. Following the result, Prime Minister David Cameron promptly resigned ensuing a period of uncertainty now awaits the UK economy and its currency exchange rates.
The UK’s decision to vote to leave the EU caused a domino effect of stock market losses as investors started to sell UK-based stocks, which had enjoyed stellar returns for years.
It was an assured address by the Governor of the Bank of England, Mark Carney, which appeared to settle nerves and convince markets that the sky had not fallen on their heads. Final results showed 17.4M voted to leave, 16.1M to remain.
Strong Punch To The British Pound
The initial big hit to the Pound came from Sunderland, an electoral area that got expected to deliver a win for Remain. In the event, the Brexit victory was significant, and markets quickly got the hint that this Referendum was not the one-way bet for Remain expectations.
Societe Generale Clear Warnings
GBP British Pound to fall Another 10% While sterling has seen to be more settled, analyst Kit Juckes at Societe Generale warns there could be more significant declines ahead.
Brexit is not a ‘Lehman moment that will trigger an unforeseen chain of events. The economy is not going to collapse, and there will not be mass unemployment in Britain. Policymakers and companies have had time to make contingency plans, even if they can’t fully offset the impact.
The Step Back From Globalisation For The UK.
In a statement released in March 2016, David Cameron announced that Britain would leave the European Union on June 23, 2017. A few days earlier, a group of prominent economists warned that Brexit could have dire consequences for the UK economy, with the loss of trade with the rest of the world and the imposition of high costs for goods, services, and investments across the UK.
That’s a trend gaining political support across the west. Such a significant secular shift has the potential to have substantial implications for growth, corporate profits and asset prices in the medium term.
UBS: Pound to Dollar spot Rate Unlikely to Fall Below 1.30 UBS has briefed clients with their view on the outlook for sterling, noting that there is a floor.
Pound EUR Forecasted to See Significant Volatility
Currencies and equities surely will see high volatility until a greater understanding of the consequences of the UK’s decision gained. In our view, it is reasonable to expect that sterling will settle in the mid 1.30s level against the US dollar until some clarity emerges.
Beyond this level, we would note that sterling would be significantly undervalued and markets would be reluctant to sell, says Dean Turner at UBS. Advertisement Pound sterling Steadier post-Carney It appears Carney’s appearance has aided a recovery in sterling. At 1.2482 the Pound to EUR is not too far below the mid-June lows.
Volatility Expected On The Pound EUR Currency Pair
To the contrary, if investors believe the pound will remain secure and will hold its present strength in the weeks ahead, they will be much more likely to take their money out of the pound.
We are still some way above the February lows in the late 1.23s. Bank of England Carney Speaks made a very assured and direct address to the markets.
He says we should expect volatility, but the Bank of England is well prepared for Brexit having put in place extensive planning. The Bank will not hesitate to take additional measures and has 250BN Pound of additional funds is available to markets.
Strong UK Financial System
The capital requirements of banks x10 higher than at the time of monetary crisis. Foreign currency liquidity to expand. In the coming week, the Bank will assess economic conditions.
Will the Pound Rise Against the Euro?
Which is the most crucial factor about how the British Pound will get recalibrated in a post-Brexit world. The Bank of England, like all central banks, has the power to alter the exchange rates of currencies.
It’s not known if the PoundPound will rise against the euro soon, but some believe it might never happen.
“There is no doubt the pound’s exchange rate will be volatile,” says David Tins ley, an analyst at London -based Capital Economics. Reference HERE
As of Today, How Many Pounds is a Euro?
1 Euro equals 0.90 Pound sterling, today 18/06/2020. The Pound has a value higher than the EUR and the dollar, but the euro has an economic value below the USD and PoundPound.
For daily reference on the Pounds to EUR exchange rates you can check the daily spot rates against the sterling report of the Bank of England in the Link
The Highest Pound to Euro Exchange Rate Ever
It happened back in May 2000, when the record took place, giving the Pound an all-time high exchange rate of €1.752. This question represents a relevant historical data all Forex traders should know. Also, we can ask ourselves the opposite:
The Lowest Pound to EUR Exchange Rate Ever
A whooping €1.02 exchange rate hit the markets on December 30 2008.
How Many Euros Would I Get For 500 Sterling?
- Doing that money exchange back in May 2000 you would have got 876 Euros!
- The same transaction on December 30 of 2008 should have got you 510 Euros!
- As of today, with an exchange rate at this very moment of 1.13, 500 GBP represents 565 Euros.
To give you an idea of the volatility, a currency experience thru economic changes or events.
Pounds To EUR Forecast Battle Started!
The battle of the analysts begin. Nordea sees 1.22 for Pound to EUR as an immediate target CBI: Businesses Need Bank of England to Provide Steady Hand Carolyn Fairbairn, CBI Director-General, says the urgent priority now is to reassure the markets.
We need strong and calm leadership from the Government, working with the Bank of England, to shore up confidence and stability in the economy. “The choices we make over the coming months will affect generations to come. Not time now for rushed decisions.
Exchange Rate Below December Uptrend
The 200-day line at 1.1100. On the indicator side, the sell signals dominate. A test of the critical support around 1.05/08 cannot get ruled out in the medium term, says Ralf Umlauf at Helaba.
We have noted that many analysts have forecast the EUR to hit parity against the dollar on a Brexit. Brexit Announced At 5 AM it became clear Brexit did happen. Leave Now Forecast to Win by Bookmakers The betting markets have entirely flipped.
Brexit Forecasts Again
Societe Generale updated their clients with their latest Brexit forecasts earlier: Pound to Dollar to fall to 1.30 -1.35 quickly and they look for an eventual fall to 1.20- 1.25 EUR/USD to fall to 1.04-1.08 initially. And potentially moves over time The Pound to Euro to fall 1.25 – 1.1765 USD/JPY potentially breaking 100 temporarily.
Remain Still Tipped to Win by TD SecuritiesRemain should still win the day say TD Securities. We now have the first ten voting areas reporting, and far the results show support for dally at 46.3% and Leave at 53.7%.
But with just over 1% of votes reported, there remains a long way to go. Turnout has so far averaged 73%, which again is supportive of the Remain camp. Most of the results have been in line with our forecast models (see below), which continue to move towards a final 52% Remain vote for the night, says James Rossiter at TD Securities.
The Perspective For Volatility On The Pound Sterling
Sunderland Sinks Sterling Shock results in from Sunderland where Remain was supposed to win. Leave takes 61% of the vote. “To set tonight’s volatility in perspective, sterling’s plunge on that Sunderland count was more prominent than Black Wednesday’s 4.1% drop. Markets are incredibly nervous now, and it’s tin hats time.
When leaving wins, there will be carnage for cable.” – Joe Rundle at ETX Capital. Newcastle, Results Raise Eyebrows Newcastle-Upon-Tyne has delivered a very close victory to Remain, and it got expected to be stronger by pollsters. Remain: 50.7%, Leave: 49.3% .
With rumours of Leave doing well elsewhere, nerves are high, and volatility might extend.
The GBP has pulled back from recent highs on the news.
Risk Of Brexit Still Priced
Meaning there is unlikely to be much more upside left in sterlings tank after the gains seen through the day. Nordea Shadow Forecasts for FX on Brexit a new table from the team at Nordea Bank, who we have been following with interest today. The table shows its official forecasts, based on Remain winning.
Forecast for a Brexit in the Short-Term
Pound sterling Turns Softer Ahead of Results Release The GBP has no doubt lost a lot of its shine heading through mid-afternoon. Traders may have realised how ridiculously aggressive the move higher in sterling was getting and have decided to exit in case they have got it spectacularly wrong.
And, as we note below, the Pound has pretty much recovered all its Brexit premium – i.e. a gap between where should be and where it got based on Brexit fears. Panic Buying of Currency Confirmed There have been anecdotal reports of queues forming outside many of Londons FX bureaus this week.
The Asymmetrical Bet Pound To Dollar
As of now, Pound to Dollar became a highly asymmetrical bet with most of the upside factored to a trade. If the delay does win the cable rally might peter out at the 1.5000 level. However, if Leave begins to pull ahead, the currency pair could slide as much as one thousand points in a matter of minutes.
Nordea: Pound to Dollar to Stay Above 1.50 Even on Brexit Update from Sandte et al. at Nordea Bank: With bookmaker odds moving in favour of Bremain (over 80% now), the markets are cheering, and we side with them.
The pounds to dollars just hit new highs of the year, 1.4886. A significant level, breaking the downtrend since 2014, suggesting more upside risks.
What can Push the Pound To Dollar Higher?
The market has room to reprice BoE on Bremain – bring forward the first rate hike from more than thirty months from now to sometime early next year, which should push the pounds to dollars to 1.50 and above in the short term. Our 3M forecast remains 1.47 for pounds to dollars, but it is subject to upward adjustments in case of Bremain.
IPSOS Mori Poll Sparks the Rally The final poll is out this one from Ipsos MORI. It shows Remain ahead on fifty-two to Leaves 48. Most as the cause of the recent surge in Pound to Dollar and GBP/JPY.
So look for massive directional bets on the market to indicate which way they see the results as having gone. A plummet in the pound sterling tells us Brexit has won. Be careful, and big-money traders may know what is going on before the results are made known.
Has The Pound Sterling Already Hit Its Best Against The EUR?
How much higher can the Pound to Euro extend on a final Remain outcome? “At this stage, it appears that much—if not most—of the referendum risk premium may have been squeezed out of GBP,” says Ned Rumpeltin, an analyst with TD Securities.
Rumpeltin thinks sterling’s sharp rise over the last several days has largely sapped its ability to rally strongly on a Remain win. “Sterling can – and will – still pop higher on a vote to stay an EU member, but our ambition is considerably more limited than it had been,” says Rumpeltin.
We suspect the initial target for a Pound to Euro rally would be the 1.32 highs recorded in late May – a time when markets were writing off the chance of a Brould that be the fair value sterling will strive for once the Brexit premium got dismissed?
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