Euro to Pound Exchange Rate Still on Track for Worst Week of Losses Since 2017
While the Euro to Pound Sterling (EUR/GBP) exchange rate rebounded slightly from its worst levels this morning, the pair is still on track to have seen its worst week in over a year amid hopes that a No-deal Brexit can be avoided.
Since opening this week at the level of 0.8827, EUR/GBP has spent most of the week tumbling on a combination of poor Eurozone data and Brexit hopes.
EUR/GBP has shed over a pence and trended near the level of 0.8661 at the time of writing on Friday morning. The pair did rebound slightly after briefly hitting its worst levels since May 2017 – 0.8622.
Investors have had little reason to buy the Euro (EUR) this week as Eurozone data continues to indicate that the bloc’s economy is slowing at an even worse pace than expected.
This made it easy for a stronger Pound (GBP) to register strong gains this week.
Euro (EUR) Exchange Rates Plunge as Eurozone Ecostats Fail to Impress
Many factors, both domestic and global, have left the Euro unappealing this week.
Starting out the week, the International Monetary Fund (IMF) ramped up concerns about Europe’s slowing growth and cut its growth forecasts. Disappointing Eurozone confidence stats were published too.
This was followed on Thursday by Markit’s key January PMI projections, which came in well short of expectations in many key prints.
All the Eurozone’s overall figures came in between 50 and 51, putting them worryingly close to the 50 point mark separating contraction from growth. The data worsened concerns that the Eurozone’s economic outlook was even weaker than expected.
The European Central Bank (ECB) also held its January policy decision on Thursday, at which ECB President Mario Draghi ramped up concerns about the risks to the Eurozone economy.
These concerns were rounded off on Friday when Ifo published its latest German business confidence survey stats. The expectations and business climate figures came in lower than forecast.
Pound (GBP) Exchange Rates Fall Back as Investors Digest DUP Speculation
Overnight, a report emerged claiming that the DUP had privately agreed it could support the UK government’s long-negotiated Brexit deal.
The report claimed that the DUP would support the bill in its next Parliament vote on the condition that the government is able to acquire assurances that the controversial Irish backstop will have a clear time-limit.
However, the Pound’s jump in reaction to the report was limited, as the DUP has always indicated that its biggest issue was with the Irish backstop plan and the UK government has been unable to acquire additional assurances from the EU on the plan so far.
According to Jeremy Stretch, Head of G10 Currency Strategy at Canadian Imperial Bank of Commerce:
‘The problem with the Sterling bounce is that the story is predicated upon a deal that is currently not on the table,
The EU currently demand that a backstop ‘insurance’ policy cannot be time limited.’
However, the Pound is still on track to sustain major gains against the Euro this week, as markets are generally becoming more confident that UK politicians will work to avoid a worst-case scenario No-deal Brexit.
Euro to Pound (EUR/GBP) Exchange Rate Investors Await Eurozone Data and Brexit Debate
Next week is set to be another pivotal week for the Euro to Pound exchange rate, with a slew of influential Eurozone ecostats due for publication and UK Parliament expected to hold further debate on the government’s Brexit deal.
If the Brexit outlook shifts, the Pound could be in for a significant shift in movement. The Euro is likely to be influenced by notable Eurozone ecostats throughout the week.
French consumer confidence will be published on Tuesday, with German and Eurozone confidence stats following on Wednesday.
Wednesday will also see the publication of France’s Q4 Gross Domestic Product (GDP) estimate, and Germany’s January Consumer Price Index (CPI) inflation projection.
Further influential Eurozone stats will be published throughout the second half of the week, including overall growth rate, unemployment rate and inflation rate figures for the bloc.
If the data beats market expectations, Eurozone economic concerns could lighten and EUR/GBP could recover further.
However, if there are further signs that a No-deal Brexit can be avoided or even that a second Brexit referendum could be possible, the Euro to Pound (EUR/GBP) exchange rate could be in for even further gains.