Homepage » Brexit » EUR GBP Exchange Rate Holds Ground despite Mixed Eurozone Data

EUR GBP Exchange Rate Holds Ground despite Mixed Eurozone Data

  • EUR GBP Exchange Rate Remains at 0.88 – Pair holds above 0.87
  • Euro Sturdy Despite Slowing Eurozone Wage Growth – Plus lower German business confidence
  • EUR Forecast: Eurozone Consumer Confidence on Thursday – German confidence on Friday
  • GBP Forecast: Brexit Developments Could Influence Trade – As well as UK growth data

The EUR GBP exchange rate has avoided drops so far this week, despite Sterling being supported by UK data. Weakness in the US Dollar (USD), as well as market anticipation for a strong economic performance from the Eurozone in 2018, have supported the shared currency.

Last week saw EUR GBP hit a low of 0.8763 and a high of 0.8851 before settling on the level of 0.8820. This week the pair continues to fluctuate but generally remains in the region of 0.88 despite a brief dip to 0.8797 on Monday.

Euro (EUR) Strong Despite Mixed Eurozone Data

Multiple Eurozone confidence stats are set to be published this week and Tuesday saw the first of these come in.

Ifo published its German business confidence report from December, which fell short of expectations in two prints.

The Ifo expectations print missed the expected 110.7 and slipped from 111 to 109.5, while the business climate figure dropped from 117.6 to 117.2 rather than the predicted 117.5.

However, the current conditions figure did beat expectations of 124.7, coming in at 125.4. The previous figure was revised higher from 124.4 to 124.5.

While the results fell short of expectations, it rounded off a strong year for German confidence. Ifo analysts believe that the unexpected drop in business confidence has been due to uncertainty and struggles in German coalition negotiations.

The Eurozone’s Q3 wage growth results slipped slightly too, falling from a revised two-year-high of 2.1% to 1.6%.

The slowdown in wage growth is likely to indicate to the European Central Bank (ECB) that Eurozone inflation is still somewhat subdued.

The bank is still hoping that strong Eurozone growth and job market data will help to bolster Eurozone inflation and wages in the coming years, but for now the bank expects that Eurozone inflation will remain below the 2.0% target until at least 2020.

Still, overall the Euro has been able to hold its ground against Sterling this week. Market expectations for the Eurozone to see strong economic growth in 2018, as well as weakness in its rival the US Dollar (USD), have left the Euro an appealing investment to currency traders.

Pound (GBP) Remains Weighed by Brexit Uncertainties

Monday’s UK data helped the Pound to avoid major losses, but market demand for the British currency is mixed too. This has led to fluctuations in EUR GBP exchange rate trade.

The Confederation of British Industry’s (CBI) December industrial trends orders report was forecast to slip to 14, but instead remained at 17 and printed a joint 30-year-high overall.

This followed last week’s stronger than expected UK retail sales and wage growth data, though other aspects of the report, such as uncertainty on if these strong trends can continue, have weighed on the Pound.

On top of this, investors remain concerned about the Brexit process. UK-EU trade talks are still not set to begin until March 2018, which has investors concerned about whether negotiations on trade and transitional deals will finish in time for the Brexit date in March 2019.

Stephen Gallo, currency strategist at BMO Capital Markets, summed up the current investor anxiety on the Pound;

‘We’ve averted a near-term catastrophe and an extended stalemate in the talks, but now we move on to trade and transition. In one sense there’s been a bit of a resolution but in an another sense we’re still got a long way to go,

Sterling is just treading water – I don’t think anyone is thinking of putting any big positions on until the first or second week of January.’

EUR GBP Exchange Rate Forecast: Eurozone Confidence Data in Focus

While there may not be much room for major EUR GBP exchange rate movement before the end of the year, upcoming Eurozone and UK ecostats could still influence the pair slightly this week.

Thursday will see the publication of the Eurozone’s December consumer confidence projections, as well as French business confidence data from December.

Friday will follow with Germany’s January consumer confidence survey from GfK, as well as France’s final Q3 Gross Domestic Product (GDP) results.

Britain’s economic calendar won’t be as busy, but Sterling could be influenced by the UK public sector net borrowing report on Thursday or the Q3 UK growth report on Friday.

On top of this, Sterling trade will of course continue to react to any fresh developments in Brexit talks – such as the tone the UK government will take in trade talks.

EUR GBP Interbank Rate

At the time of writing this article, the EUR GBP exchange rate trended in the region of 0.8825. The Pound to Euro exchange rate traded at around 1.1328.