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Pound to go 1-1 with Euro
Published on 15.08.2017 12:04

The British pound is under pressure today after the latest round of inflation figures all but killed chances for a rate hike from the Bank of England this year.

Consumer price index figures from the UK earlier today hit the market at 2.6 percent against analysts’ expectations for a figure of 2.7 percent and marks the 2nd straight month of declines.

The lack of consumer confidence may be worries about the ongoing Brexit negotiations which seem to be going nowhere from the British side with the government still seemingly without a plan on what to do.

"The EU have consistently said that no future talks would start until the exit arrangements are made clearer. Something that he is also reported to suggest could be delayed past the soft deadline of October if the current pace of negotiations continues as they are." Said Jordan Rochester from Japanese banking giant Nomura.

The uncertainty is bound to keep the British pound under pressure against the major currencies and some are predicting that the Euro will be the biggest beneficiary, and will be trading 1-1 with the British pound before too long.

“In euro-sterling we’ve had a very strong conviction and it’s one of the biggest forecasts I ever remember making on a major currency,” said David Bloom, HSBC’s London-based global head of currency strategy

“That’s a 20 percent move and that’s quite something. It’s very unusual that we make such, what was at that time, an outrageous forecast, but we are roughly half way there and we believe in it,” he added.

Also hurting the pound today was the release of the latest producer price index figures that came in at 0.1 percent against expectations for a figure of 0.2 percent and shows that business, as well as consumer confidence is suffering the effects of Brexit.


Andrew Masters

Analyst

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