GBP/USD: Brexit Lowers Pound Close To $1.30 vs. Dollar
  • Pound (GBP) fell last week despite rate hike
  • Political uncertainty remains
  • Euro (EUR) rallies after a less dovish ECB
  • Eurozone investor sentiment due

The Pound Euro (GBP/EUR) exchange rate is edging higher after steep falls at the end of last week. The pair lost -1.75% across last week, settling on Friday at €1.1816 towards the low of the week and the lowest level this year. At 05:45 UTC, GBP/EUR trades +0.07% at €1.1824

The Pound gained versus the US dollar last week, but lost ground versus the euro despite the Bank of England raising interest rates. The UK central bank rose interest rates by 25 basis points to 0.5%. 4 of the 5 policy members had in fact voted to raise interest rates by 50 basis points to 0.75%. S this was a more hawkish vote that what the markets were expecting, highlighting the BoE’s concerns over rising inflation.

Political uncertainty will continue to limit any gains on the pound. Following the report on party gate Prime Minister Boris Johnson has managed to hold onto power. However, the number of letters of no confidence are increasing. There are still questions over whether he will be able to retain his position.

Looking ahead, today there is no high impacting UK data. Halifax will release its house price index, which will give insight into the health of the housing market. However, the interest rates set to rise the housing market could start cooling.

The Euro surged higher last week, or more specifically surged on the last two days of last week after the ECB monetary policy meeting. The ECB kept rates on hold, as expected, but in the press conference ECB governor Christine Lagarde sounded much less dovish than expected. The euro jumped as the market started pricing in a rate hike this year.

On Friday Eurozone retail sales came in significantly worse than expected at 2% growth, short of the 5.1% forecast. However, euro investors brushed the data off.

Today Eurozone investors sentiment is expected to show an improvement in February to 15.2, up from 14.9.