The Pound Euro (GBP EUR) exchange rate undulated wildly yesterday as investors reacted with uncertainty to a busy day of UK economic news.
- GBP EUR exchange rate sinks after GDP figures – Markets unimpressed by better-than-forecast performance
- Pound uncertain after Nissan promise – Markets unsure what government offered car manufacturer
- EUR GBP advances on CETA progress – Trade deal is rescued, Deutsche bank posts surprise profit
- GBP EUR exchange rate forecast – Little chance of house price data moving Pound
The Euro Pound (EUR GBP) exchange rate, meanwhile, tracked the progress of the Comprehensive Economic Trade Agreement (CETA), manging to salvage the agreement a couple of days after negotiations collapsed. A surprise announcement from Deutsche Bank also helped improve appetite for the common currency.
GBP EUR Exchange Rate Drops Further; NI Court Overturns Challenge to Brexit
12.50, 28/10/2016; The Northern Ireland high court has just thrown out a legal challenge to Brexit, lessening the chances a split with the EU can be blocked. Campaigners had argued that the UK parliament using royal prerogative to trigger Article 50 was a breach of Northern Ireland law and that the matter would require a vote from MPs. Many investors are hoping that Brexit can still be blocked by parliament, so the fact a high court has overturned the challenge does not bode well for a similar case currently running in the UK.
Pound (GBP) Soft after Consumer Confidence Weakens
08.48, 28/10/2016; The latest GfK consumer confidence survey has printed in line with forecasts, showing that sentiment has returned to a downtrend after rebounding to pre-referendum levels last September. The index weakened from -1 to -3. GBP EUR exchange rates are down -0.1%.
GfK’s Joe Staton explained;
‘Declining optimism about economic prospects for the wider UK economy has depressed the consumer mood this month. Despite the continuing feel-good factor arising from persistent low interest and inflation rates, sterling’s sharp decline is arguably stoking fears that price rises will hit UK living standards hard next year.’
Pound Euro (GBP EUR) Exchange Rates Slump despite Strong UK Q3 GDP Figures
The positive upsurge for Pound Sterling to Euro lasted for only a few minutes after the release of above-forecast UK GDP figures yesterday. The third-quarter data showed that year-on-year growth unexpectedly accelerated from 2.1% to 2.3%, while quarter-on-quarter growth slowed from 0.7% to 0.5% instead of to 0.3% as predicted.
While the Government and Brexit supporters were quick to seize upon the data as evidence of minimal impact from the vote to leave the European Union on the economy, GBP EUR quickly weakened. This was partly because a breakdown of the data revealed that services was the only sector of the economy to record growth, with every other aspect contracting. Additionally, with many economists warning that the real damage wouldn’t materialise until the beginning of 2017, markets were still unconvinced that the data proved there was nothing to worry about.
UBS Wealth Management’s Head of UK Investment Office, Geoffrey Yu, claimed that;
‘Anecdotal evidence supports the view that we’re yet to see any meaningful damage as a result of the Brexit vote, at least in the short-term. Of course, we should not overlook the lingering sense of uncertainty. Though the economy has fared better than initially feared, we expect that economic growth will slow down relative to the early part of this year.’
The Pound did later receive some temporary support after Nissan announced the UK government had been able to provide the necessary assurances that the automotive sector would be protected from the negative effects of Brexit and would remain competitive. However, GBP EUR later returned to the downtrend as the government faced calls to explain exactly what assurances or promises it had given to Nissan. The Pound Euro exchange rate ended the day trading down -0.6%.
Euro Pound Exchange Rates Boosted by CETA Rescue and Surprise Deutsche Bank Profits
The Euro firmed throughout the session yesterday as it appeared EU lawmakers had been able to rescue the nearly-collapsed Comprehensive Economic and Trade Agreement (CETA) with Canada. The talks appeared to have crumbled earlier in the week, with the Canadian International Trade Minister Chrystia Freeland having declared the deal ‘a failure’ after running into difficulties with regional Belgian governments. While all other member states have backed the deal, Belgium was unable to back the deal due to a veto by the French-speaking region of Wallonia.
However, yesterday the Belgian Prime Minister Charles Michel announced that an accord had been reached, meaning the entire of the EU was now in agreement and could begin the ratification process for the deal. Canadian Prime Minister Justin Trudeau had been due to attend an EU summit yesterday to sign the finalised deal, but this had to be delayed because of the complications.
Freeland’s Press Secretary, Alex Lawrence, commented that;
‘This is a positive development, but there is still work to do. There remain additional steps before signing. Canada has done its job. We negotiated a progressive agreement that will create jobs and growth for the middle class. Canada remains ready to sign this important agreement when Europe is ready.’
Also boosting the Euro Pound exchange rate yesterday was the surprise news that Deutsche Bank posted a profit in the third quarter of the year. The news took investors unaware, as Germany’s biggest lender has been hit by a US$14 billion fine from the US Department of Justice (DoJ). Deutsche Bank is still in the process of negotiating the final settlement, but markets have been concerned that the fine could trigger the collapse of the entire German banking sector, if not the Eurozone.
After posting the €278 million net profit, following a -€6 billion loss during the same period last year, DB chief John Cryan stated;
‘Discussions with the Department of Justice are moving forward and we are working hard on achieving a resolution of this matter as soon as possible. Simultaneously, our environment has worsened further in some important areas. As we indicated at the time of our half-year results, we will have to accelerate and intensify our restructuring.’
GBP EUR Exchange Rate Forecast; Pound to Ignore UK House Prices as GDP Hangover Persists?
If the markets reacted negatively to the latest positive GDP figures, there is seemingly little hope of a Pound exchange rate rally following today’s Nationwide house prices survey for October.
The Eurozone is set to release multiple datasets, although with the preliminary German consumer price index figures for October on the calendar it is unlikely actualised French GDP or low-impact Eurozone confidence survey scores will have much of an effect on Euro exchange rates.
German CPI is predicted to see monthly price growth hold steady at 0.1%, while year-on-year price growth is expected to have ticked higher from 0.7% to 0.8%.
Interbank GBP EUR Exchange Rates
At the time of writing the Pound Euro (GBP EUR) exchange rate was trading in the region of 1.11, while the Euro Pound (EUR GBP) exchange rate was trending around 0.89.
