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EUR GBP Exchange Rate Advances as ‘Brexit’ Sentiment Defies Data

  • EUR GBP Exchange Rate Rises – Euro gains despite impressive UK data.
  • Euro Stable on French GDP – Spanish data helps offset losses.
  • German CPI in Focus – Euro may gain if data shows growth as forecast.

The EUR GBP exchange rate rose yesterday as upbeat GDP figures were unable to negate market uncertainty over ‘Brexit’, allowing the Euro (EUR) to surge to a new weekly high.

Euro (EUR) Bludgeons the Pound (GBP) Despite Positive UK GDP

The Euro pressured the Pound (EUR GBP) yesterday despite the UK economy showing growth in the three months following the ‘Brexit’ vote.

British GDP figures showed an impressive rise to 2.3% in the third quarter, beating forecasts that it would remain at 2.1%. However despite spiking briefly after the report was released the Pound quickly receded again, leaving the Euro to advance.

The Pound Sterling (GBP) fall was largely attributed to the fact most sectors of the UK economy – such as construction and industry – actually fell in the third quarter and that growth in Britain’s GDP was entirely due to its services sector. The services sector is a part of the UK economy that is likely to see the most negative impact from ‘Brexit’, with UK banks coming under threat as the City of London could potentially lose its vital passporting rights, following the UK’s split from the EU.

This is just part of rising investor uncertainty over ‘Brexit’ as they believe that the UK government is seeking a ‘hard Brexit’ which will likely see Britain gain stronger controls on immigration, but only by relinquishing its access to the single market.

Euro Stable as Upbeat Spanish Data Offsets French Downturn

The Euro managed to stabilise after its recent gains despite the French economy recovering slower than expected, thanks to impressive growth in Spain.

France’s latest GDP report disappointed investors, with growth only coming in at 0.2% in the third quarter, up from the previous reading of -0.1%  but falling short of predictions that it would rise to 0.3%. This weighed on the single currency as markets began to doubt that France would reach its targets for growth this year, with finance minister Michel Sapin admitting;

‘It makes it harder to reach 1.5 percent this year, I won’t deny it, but it doesn’t call into question next year’s growth figures’.

Any significant drops in the Euro were prevented however thanks to bumper GDP figures from Spain, which showed that the Spanish economy had grown by 0.7% in the last three months. This beat both French and British gains despite the lack of a majority government for Spain after two general elections.

Acting Prime Minister Mariano Rajoy will be seeking to form a new government after tomorrow’s confidence vote in the Spanish parliament, which could help to further strengthen the Euro should it result in a stable Spanish government.

EUR GBP Exchange Rate Forecast: Euro May Rise on Upbeat German CPI

The EUR GBP exchange rate may move closer to parity later today with the release of Germany’s latest consumer price index, which is forecast to rise to 0.8% in October, up from 0.7% the month before. However, a surprise drop could provide the Pound with a brief respite.

Sterling may come under further pressure later today following the release of Nationwide’s UK house price report, which is currently predicted to see figures fall to 4.9% in October, down from 5.3% in September. However, even should the report see an unexpected rise, its impact is unlikely to be significant as ‘Brexit’ sentiment continues to overshadow the currency.

Current Interbank Exchange Rates

At the time of writing the EUR/GBP exchange rate was trending around 0.89 and the GBP/EUR exchange rate was trending around 1.11.