- EUR GBP Stabilises after Spike – Pound recovers from ‘Brexit’ memo slump.
- European Populist Fears – Euro shaken by possibility of further populist momentum in Europe after Trump victory.
- Euro Data Mixed – German ZEW survey impresses as GDP recedes.
- Eurozone CPI due Thursday – Expected rise may see EUR GBP advance.
The EUR GBP exchange rate dropped back to trading close to the week’s opening levels after spiking yesterday following a leaked memo that claimed the UK government has no ‘Brexit’ plan.
Euro Pound (EUR GBP) Flat after Yesterday’s ‘Brexit’ Memo Bounce
The Euro Pound (EUR GBP) exchange rate rallied on Tuesday, bringing an end to Sterling’s two-week advance against the single currency as the media reported on a leaked memo suggesting that the UK government still had no clear strategy on how to split from the EU.
The memo renewed market fears about ‘Brexit’ as it indicated that Whitehall was currently working on 500 ‘Brexit’ projects and that it may need an additional 30,00 extra staff to cope. The document also identified a split in the cabinet with pro-leave MPs, such as International Trade Secretary Liam Fox and Brexit Secretary David Davis, facing those who campaigned to remain, such as Chancellor Philip Hammond and Business Secretary Greg Clark.
However the Pound was able to claw back its losses later as Prime Minister Theresa May refused to recognise the memo, saying that she ‘wholeheartedly’ disputed the claims that there were no plans for ‘Brexit’ as Doleoitte, who created the document, said that it had been created without access to Number 10.
Euro (EUR) Weakened by Populist Fears
The Euro has struggled to advance following Donald Trump’s surprise victory in the 2016 US elections last week. The win, which was widely seen as impossible ahead of the election has stoked fears that other populist parties in Europe such as the National Front in France could also upset the status-quo.
What is particularly worrying about the rise of populist parties in Europe is that many have expressed their disdain for the EU with some, such as National Front leader Marine Le Pen -who gained 27% of the popular vote in French Reginal elections last year, vowing to pull France out if she is elected in next year’s presidential elections.
Euro Pound Exchange Rate Struggles to Advance on Mixed Eurozone Data
The Euro was unable to capitalise on the Pound’s weakness yesterday as mixed data provided little demand for EUR GBP.
Germany’s November economic sentiment ZEW survey exceeded expectations yesterday as it surged past forecasts of 8.1, rising from 6.2 the previous month up to 13.8.
However any gains for the Euro were muted by a disappointing GDP report from Germany as it fell to 1.7% in the third quarter after it was widely predicted to remain at 1.8%, which prevented a rise in the overall Eurozone GDP figures.
EUR GBP Exchange Rate Forecast: Eurozone CPI Report Due Tomorrow
The EUR GBP exchange rate is likely to remain relatively stable today due to a lack of Eurozone ecostats and following some mixed employment data from the UK which saw the unemployment rate to fall from 4.9% to 4.8% in September, but jobless claims rise from 5.6k to 9.8k in October.
Looking forwards, the Euro may advance tomorrow should the Eurozone consumer price index impress, although it may put significant pressure on the Euro should inflation not rise as predicted as investors worry that it would cause the European Central Bank to extend its monetary easing programme past March 2017.
Current Interbank Exchange Rates
At the time of writing the EUR/GBP exchange rate was trending around 0.86 and the GBP/EUR exchange rate was trending around 1.16.