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Euro Pound (EUR/GBP) Exchange Rate Falls on Eurozone Woes as Italian Economy Continues to Struggle

EUR/GBP Exchange Rate Slips as Eurozone Lending Figures Fall

The EUR/GBP exchange rate is down today and is currently trading around £0.8580 on the inter-bank market.

The Euro (EUR) further weakened against the Pound (GBP) following disappointing Italian consumer confidence figures for February, which fell to 112.4 against last month’s 113.9.

This was followed by a fall in Italian business confidence for February, which has further worried EUR traders as Italy’s economy continues to show signs of slowing following its recent lapse into a recession.

Today also saw the release of the Eurozone’s year-on-year M3 lending figures for January fall to 3.8% against 4.1% in December.

Claus Vistesen, an Economist at Pantheon Macroeconomics, was pessimistic, saying:

‘We suspect this year-over-year rate will dip further in the next three-to-six months, as a lagged effect of slower GDP growth.’

The Pound, meanwhile, has held onto yesterday’s gains following Prime Minister Theresa May’s announcement that MPs would be able to vote on an extension of Article 50, and, furthermore, to remove a no-deal Brexit from the table.

Sterling has benefited from the quelling of fears of a no-deal Brexit, with the Environment Secretary, Michael Gove, saying May had ‘done the right thing’.

This gained further support from the Secretary of Work and Pensions, Amber Rudd, who commented:

‘I’m part of a plot to back the prime minister and make sure we get a good Brexit deal through Parliament as soon as possible.’

GBP/EUR Exchange Rate Rises as Brexit Deadlock Challenged by call for Second Referendum

The Pound has continued to benefit today as the Brexit deadlock was severely challenged by both May and Labour leader Jeremy Corbyn yesterday, who said he would back a second referendum.

Corbyn said:

‘[W]e are committed to … putting forward or supporting an amendment in favour of a public vote to prevent a damaging Tory Brexit being forced on the country.’

Sterling is continuing to benefit as unlikely candidates such as Tory Eurosceptic Jacob Rees Mogg agree in principle to back Theresa May’s Brexit deal if there was a time limit on the Northern Irish backstop.

Rees-Mogg said:

‘I can live with the de facto removal of the backstop…. I mean that if there is a clear date that says the backstop ends, and that is in the text of the treaty or equivalent of the text of the treaty.’

EUR/GBP Forecast: Sterling Could Rise Further if No-Deal is Removed

Euro investors will be awaiting the publication of the German year-on-year harmonized index of consumer prices for February tomorrow, and with any signs of an increase this could benefit the EUR/GBP exchange rate.

Pound investors, meanwhile, will be looking ahead to tomorrow’s release of the Gfk consumer confidence figures for February, which are, however, expected to decrease.

The EUR/GBP exchange rate is likely to remain fixated on Brexit developments over the course of this week, with recent optimism bolstering the Sterling and, with any further news of a likely removal of a no-deal, the Pound could rise further.