EUR/GBP Fundamental Analysis – week of July 11, 2016 -Forecast

The EUR/GBP ended the week at 0.8523 gaining 1.50% for the week and up by 8% for the month. The pound continues to decline while the euro weakened but much less so. Sterling tumbled to a 31-year low against the dollar and oil dropped below $50 a barrel as concerns deepened over the impact of Brexit on the UK economy. Bank of England (BoE) Governor Mark Carney has been front and center as his Brexit scenarios have started to come true. Criticized by the Leave camp for being biased in his warnings about the impact of the historic vote he has now stepped forward and backed the resilience of the U.K. economy while at the same time announcing an imminent summer rate cut. The July Monetary Policy meeting on Thursday, July 14 is not when the market expects the rate cut but it could set market expectations on track for the BoE’s super Thursday on August 4. Given the political uncertainty the U.K. finds itself in as parties look for the next leader to guide them following the Brexit vote the central bank is expected to wait, but given the urgency of the situation there is also a probability of a rate cut sooner rather than later.

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