Great Britainâs pound advanced against the euro to touch its highest level in several weeks after a court in the UK ruled that the government needs parliamentary approval before starting the process of leaving the European Union.
The ruling means that the Brexit referendum is not constitutionally sufficient for the British government to leave the European Union on its own. However, the government is appealing on the basis that the referendum was only done once the House of Commons voted to give the decision to the British people.
The pound got more positive support from policy makers in the Bank of England, who unanimously voted to keep interest rates at the 0.25% level, disappointing expectations of some supporting votes for a raise. The central bank might still be heading for increasing interest rates in its next meeting, which would support stronger currency inflows due to better yields that attract global investors.
The Bank of England also changed its growth forecast for 2017 to 1.4% from 0.8% as the central bank sees better potential for the near future economic conditions. However, it reduced its growth forecast for 2018 to 1.5% from 1.8%, indicating that the bank believes the negative effect of the Brexit vote will hit the nationâs growth rate later than previously expected. However, with the level of uncertainty around and complexity of Brexit, investors view the bankâs forecasts as theoretical and will not necessarily play out in the real economy.
Inflation forecasts changed its growth forecast from 2% in 2017 and 2.7% from 2.4% in 2018 to reflect the lower value of the pound after the Brexit referendum, which is driving up prices of imported goods. The inflation target of the Bank of England is at 2%, which the bank does not expect to happen until 2020.
EUR/GBP traded at 0.8908 as of 17:08 GMT as the pair declined from todayâs high at 0.9022 at 00:35 GMT. EUR/GBP touched 0.8860 at 14:15 GMT today, the pairâs lowest level since October 6.
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