EUR/GBP: Low inflation, falling GDP, extensive job losses, and Brexit should weigh on GBP [Video]
|Listen to the latest market mood for the EURGBP pair.
Strong EUR, Weak GBP
The GBP should remain pressured in the medium term. There are a number of growing risks. Inflation has fallen m/m to 0.2% vs 1.0% in July as airline prices helped drag inflation lower. The end of the UK’s furlough scheme is due to come to an end in October. Many companies have been waiting to announce redundancies for the end of the scheme. The Bank of England has forecast that the unemployment rate will hit 7.5% at the end of this year when it is expected to expand its bond-buying stimulus programme again. So, low inflation, a falling GDP, extensive job losses and that is not to mention Brexit risk should all weigh on the GBP going forward. The Bank of England may even announce a surprise rate cut today, so be alert for that today at 11:00GMT.
The EUR should remain supported against the GBP as the ECB was less bearish than expected at the last rate meeting on Thursday last week. They even revised some inflation projections higher and were not overly alarmed about the euro’s strength.
Therefore, from a medium-term perspective expect EURGBP buyers from pullbacks.
Trade Risks
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A successful Brexit deal.
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A faster than anticipated fall in Europe’s economy.
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Steeper numbers of COVID-19 cases in Europe than the UK.
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