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Euro Pound (EUR/GBP) Exchange Rate Rises as France and Germany Team Up for European Unity

GBP EUR exchange rate outlook

EUR/GBP Exchange Rate Increases despite Poor German PPI Figures for December

The Euro Pound (EUR/GBP) exchange rate is up today and is currently trading around €0.8856 on the inter-bank market.

The Euro (EUR) managed to gain on the Pound (GBP) today despite the release of Germany’s PPI figures for December showing a worse-than-expected decrease by -0.4%.

Euro investors have been buoyed on the news that France and Germany have agreed to sign a treaty on Tuesday which is expected to formalise the Franco-German ‘economic zone’, enabling a common position and encouraging joint statements on EU issues.

Alistair Cole, a Professor of European Politics at Cardiff University, commented that this would ‘declare the centrality of France and Germany’, although also added: ‘though in practice the two countries often do not see eye to eye.’

However, Italy’s Deputy Prime Minister Matteo Salvini courted controversy by commenting:

‘It is time to oppose the Franco-German axis with an Italian-Polish axis.’

GBP/EUR Exchange Rate Falls as Pound Traders Apprehensive Over May’s Brexit ‘Plan B’

Sterling failed to gain on the Euro after the publication of the UK Rightmove House Price Index for January, which showed a rise of 0.4 % – the weakest start to the year since 2012.

Miles Shipside, a director at Rightmove, remained optimistic though, with property viewing on Rightmove’s website having increased by up to 5%.

Shipside said:

‘Mass-market home-movers have a track-record of ignoring the politics and continuing to satisfy their housing needs, and as long as these fundamentals remain in place through this period of uncertainty, the market will keep moving.’

The Pound, however, continues to be wracked by apprehension over Prime Minister Theresa May’s Brexit ‘Plan B’, which she is to deliver before a bitterly divided House of Commons in cross-party talks today.

Theresa May is coming under increasing pressure from MPs to rule out a possible no-deal Brexit scenario, with the Conservative MP Richard Harrington saying:

‘I’ve seen what may well happen with this cut off-date, crashing out in my view – is an absolute disaster – it’s not a road to a free trade agreement, it’s not a road to anything.’

EUR/GBP Forecast: Brexit ‘Plan B’ to Determine Pound Rates in Coming Week

Both the Euro and the Pound remain sensitive to UK Brexit developments, with Prime Minister Theresa May’s ‘Plan B’ expected to determine the tone of debates between the EU and the UK in the coming week.

GBP investors, meanwhile, will be awaiting tomorrow’s publication of the UK average earnings figures, with any signs of an increase potentially providing the Pound with some much-needed uplift.

Tomorrow will also see the publication of the UK ILO unemployment rate figures, which are expected to print at 4.1%.

EUR investors, however, will be looking ahead to tomorrow’s release of Germany’s ZEW survey in economic sentiment for January, which is expected to decrease.

As Brexit debates are expected to heat up once again – with May’s ‘Plan B’ potentially causing further divisions in the House of Commons today – the EUR/GBP exchange rate is likely to be driven by political forces this week.