Pound V euro: Spring Statement uncertainty leaves GBP exchange rate tight


As with Monday, today’s restricted pound movement is because of uncertainty about the contents of today’s Fount Statement.

Chancellor Philip Hammond will be presenting a summary of UK financial performance over the previous months, as well as forecasting future changes to commercial growth.

An adjustment to spending is not expected to be on the agenda, given that this is purely a ‘statement’ compared to the Autumn Budget.

Aberdeen Standard Chief Economist Lucy O’Carroll has communicated: “[Mr] Hammond has made it very clear that austerity is not contemporary to end.

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The pound euro exchange rate is currently at €1.126

“That’s a political select at this stage in the economic cycle rather than an economic vital.

“He seems very focused on maintaining the purse string tightly and not enhancing spending substantially until the next spending round, potentially in 2020.”

Such a vigilant strategy could devalue the pound, although if Mr Hammond counters with a definitive assessment of UK’s prospects then the GBP/EUR exchange rate could rise.

Although the euro to expel exchange rate has risen marginally today, the euro has still been constrained by pessimism not far from future European Central Bank (ECB) policy.

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The pound has been merchandise in a narrow range against the euro

It is absolutely crucial that we observe our price stability objective and not accept a level below that

Jan Smets, of the ECB’s control council

The ECB has kept interest rates at 0 per cent since 2016 and depicted a substantial asset-purchasing program to stimulate Eurozone economic growth.

ECB President Mario Draghi recently put that monetary policy controls could be lifted in the future, but this has been contested by another ECB official.

Jan Smets, member of the ECB’s governing council, has stated that there is a covet wait ahead before tighter monetary policy.

She said: “It last will and testament take somewhat more time to get to the [2 per cent inflation object] than we thought earlier.

“The level of potential output may have fit higher due to structural reforms and slack may be bigger.

“It may take more than we rationality and inflation pressures could take more time to build.

“It is definitely crucial that we meet our price stability objective and not accept a on the up below that; the objective is what it is and we are not there yet.”

The Spring Statement will be the rudimentary source of GBP movement today.

If Mr Hammond has mainly good news all round UK economic growth then the pound could rise sharply.

The euro could dip against the pound when today’s Eurozone data comes out – the most important stats will be Irish GDP growth readings for Q4 2017.

Growth levels are slant to decline for the year-on-year and quarter-on-quarter readings, which could lead to a euro to beating exchange rate decline.

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