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Euro Pound (EUR/GBP) Sterling Exchange Rate Rangebound despite Poor Eurozone Data

EUR/GBP Exchange Rate Steadies despite Disappointing Eurozone PMIs

The Euro Pound Sterling (GBP/EUR) exchange rate is steady today, and is currently trading at €1.1136 despite the release of disappointing Eurozone PMI figures.

EUR is recovering from yesterday’s news that European Central Bank (ECB) President Mario Draghi, announced that his bank’s quantitative easing would be wound up this year despite a slowing Eurozone economy.

Draghi commented that the ‘balance of risk is moving to the downside’ – without direct mention of Brexit or Italy’s budget controversy – further denting investor confidence in the single currency.

The Pound (GBP), meanwhile, recovered yesterday after British Prime Minister Theresa May successfully secured her position after winning Wednesday evening’s vote of no-confidence, with Sterling investors optimistic about May’s renewed resilience in pushing forward with her Brexit deal.

However GBP was dented by yesterday’s release of the RICS housing price balance for November, which showed a -11 decrease against October’s -10%.

Euro Pound Sterling (EUR/GBP) Exchange Rate Rangebound as Italy’s Budget Eases Concerns

The Euro (EUR) was dented by today’s release of the Markit manufacturing PMI for December, which showed a decrease by 51.4 against last month’s 52.7, dampening market confidence in EUR.

This was followed by the Markit services PMI for December which also showed a decrease.

Today also saw the release of the Q3 labour cost figures which showed an increase at 2.5% against last month’s 2.2%.

EUR was further strengthened yesterday by the news that Italy’s Prime Minister Giuseppe Conte had agreed to lower next year’s budget deficit to 2.04% of GDP from the controversial 2.4% previously, easing market concerns that Italy would face disciplinary actions from the European Commission.

GBP/EUR Steadies as May Rallies to Gain Support for her Brexit Deal

The Pound (GBP) meanwhile has weakened after Theresa May’s visit to Brussels yesterday to renegotiate aspects of her Brexit withdrawal deal, with the EU remaining stubborn.

Jean-Claude Juncker, the President of the European Commission, commented:

‘Our UK friends need to say what they want, instead of asking us to say what we want, and so we would like within a few weeks our UK friends to set out their expectations for us, because this debate is sometimes nebulous and imprecise and I would like clarifications.’

This has increase GBP investor concerns as May now faces the challenge of convincing Parliament to pass her Brexit withdrawal agreement, with amendments agreed by the EU remaining crucial to bolstering support behind the deal.

Xavier Bettel, the Prime Minister of Luxembourg, however supported Theresa May, saying:

‘Theresa May is clear, but the fact is that Westminster is not that clear. So we know what Theresa wants, and she wants the best possible deal in Westminster, but the problem is the MPs in London.’

EUR/GBP Outlook: Brexit and Italy Budget Remain in Focus

The Pound Euro (GBP/EUR) exchange rate is likely to be driven by political forces this week, with GBP traders’ attention being on Theresa May as she struggles against a fractious Parliament and a stubborn EU to gain support for her much-criticised Brexit deal.

The Euro (EUR) meanwhile will be affected by any further developments from France and Italy after both countries posited controversial budgets that are in contravention of EC fiscal rules.

Looking ahead to Monday, the UK will see the release of the Rightmove house price index for December, with traders paying close attention to any signs of an increase.

Thursday, however, remains the most crucial day for Sterling, with the release of the Bank of England’s (BoE) latest interest rate decision, with focus likely to be on any signs of hawkishness.

The Eurozone will also see a number of data releases on Monday, with the most significant being the Consumer Price Index figures which are expected to decrease, likely weakening the EUR/GBP exchange rate.