EUR GBP Exchange Rate Slides to a Two-Month Low as Investors Upbeat over Autumn Statement
- EUR GBP Slides after Autumn Statement – Markets positive over Chancellor’s infrastructure plans.
- German GDP Unchanged – Prompts fears of an economic slowdown.
- Markets Fear Stability of EU – Italian Referendum next month could lead the way for a new populist government.
The EUR GBP exchange rate nosedived on Wednesday as Eurozone worries were exacerbated by market reactions to the Autumn Statement.
Euro Pound (EUR GBP) Slides as Markets Optimistic over UK Autumn Statement
The Euro (EUR) tumbled against the Pound (GBP) yesterday as markets reacted positively to Philip Hammond’s first Autumn Statement as UK chancellor.
Hammond was able to allay fears over a forecast £122billion ‘black hole’ in public finances over the next five years as he announced plans to spend over £23billion on improving transport and digital infrastructure during the same period.
The additional spending is part of the Chancellor’s plans to help shore up the British economy and deal with the challenges of ‘Brexit’. Hammond hopes to ensure businesses continue investing in the UK once it splits from the EU.
Euro (EUR) Rates Struggle after Disappointing German Data
The Euro Pound exchange rate began to recover this morning despite a lack of notable growth in Germany’s latest economic data.
Germany’s GDP fell from 0.4% to 0.2% in the third quarter, in line with predictions, as a drop in German exports from 1.2% to -0.4% was balanced by a rise domestic demand over the same period.
A potential slowdown in the German economy is likely to weigh heavily on the single currency as Bloomberg reports;
‘As the Euro area’s largest economy, Germany is a crucial contributor to efforts to sustain the region’s recovery. The European Central Bank is due to review its stimulus program on Dec. 8, when it will also evaluate new potential headwinds caused by uncertainties over the consequences of Donald Trump’s surprise victory in the US election.’
However, the Euro rallied behind German business sentiment as IFO reported that it remained strong in November, holding at a two-year high of 110.4 as businesses expectations remained upbeat.
Italian Referendum Drags on Euro
Investors have become increasing anxious over the stability of the European Union ahead of next month’s Italian referendum as President Matteo Renzi has vowed to quit if his constitutional changes are rejected.
Market worry that his resignation could lead the way for a populist party to form a new government, such as Silvio Berlusconi’s Forza Italia which has become increasingly anti-EU since he was ejected from office in 2011.
This has added to investor fears over the recent rise in populist movements that could threaten to tear apart the Europe Union. Marine Le Pen’s far right National Front party is also now seen as a contender for next year’s presidential election in France following Donald Trump’s surprise win in the US elections.
EUR GBP Exchange Rate Forecast: German Consumer Confidence Report Ahead
The EUR GBP exchange rate may recover later today should Gfk’s latest German Consumer Confidence Survey perform better than predicted.
Meanwhile the Pound may advance with the release of Britain’s latest GDP report on Friday. Economists forecast that the GDP will rise from 2.1% to 2.3%, which will help to bolster market confidence that the UK’s vote to leave the EU has not had a detrimental effect on the British economy.
Current Interbank Exchange Rates
At the time of writing the EUR/GBP exchange rate was trending around 0.84 and the GBP/EUR exchange rate was trending around 1.17.