Pound euro exchange rate rallies despite warning the UK faces ‘Victorian-era’ lull in productivity
Philip McHugh May 17th 2018 - 2 minute read
The pound put on a mixed performance on Wednesday, with Sterling facing a heavy sell-off against commodity currencies, while able to gain against both EUR and USD.
However Sterling appears to be falling back again this morning, with GBP/EUR slipping to €1.1441, GBP/USD tumbling to $1.3515 and GBP/CAD nosediving to C$1.7253. At the same time GBP/AUD and GBP/NZD have both weakened today, sliding to AU$1.7951 and NZ$1.9614 respectively.
The euro may look to extend its recovery later today should the Eurozone’s construction output have surged as expected in March…
What’s been happening?
The pound came under renewed pressure yesterday as markets reacted to comments from the Bank of England’s (BoE) Deputy Governor Ben Broadbent suggesting UK productivity may have already peaked.
In an interview with the Daily Telegraph, Broadbent warned that a lull between two technological eras could prompt a fall in UK productivity akin to the Victorian era switch from steam to electricity.
Broadbent, meanwhile came under fire for his decision to label this passing of peak productivity as a ‘menopausal’ era, which observers suggest could rule him out of the top job at the BoE next year when Mark Carney steps down.
The GBP/EUR exchange rate ticked higher on Wednesday as the Eurozone’s latest CPI figures confirmed inflation slid in April, with a sharp drop in underlying inflation raising concerns the recent jump in oil may be on the only thing propping up inflationary pressures.
The euro was then further weakened by concerns the new Italian government could upend the Eurozone by asking the European Central Bank (ECB) to wipe €250m off Italy’s national debt.
At the same time the GBP/USD exchange rate appeared to stabilise late on Wednesday after some initial weakness at the start of the session.
The US Dollar was then seen to ease back even further in the evening as the currency continued to lose momentum despite some upbeat industrial production figures.
What’s coming up?
The pound looks like it may struggle through much of today’s session as fresh concerns over Brexit appear to drag on the currency.
In terms of data releases GBP investors will be looking to a speech by BoE Chief Economist Andy Haldane for some measure on how the bank’s monetary policy may shape up over the coming months, with Sterling set to rally if he appears optimistic on the chances of a rate hike in the foreseeable future.
The euro, meanwhile, could strengthen this morning with the publication of the Eurozone’s latest construction figures, with economists forecasting a sharp uptick in output in March, despite the adverse weather.
Finally, the US dollar may continue to surge against its peers today if the Federal Reserve’s Robert Kaplan further bolsters US rate expectations in a speech later this evening.