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Euro Pound Exchange Rate Eases as Eurozone’s Economic Woes Hold Back Single Currency

Pound to Euro Exchange Rate bank notes

EUR/GBP Exchange Rate Falls Despite Signs of Eurozone’s Economic Stabilisation

The Euro Pound Sterling (EUR/GBP) exchange rate eased by over 0.2% today, with the pairing currently trading around £0.855 despite Yves Mersch, a member of the Executive Board of the European Central Bank (ECB), commenting that the Eurozone’s economy is showing signs of stabilisation.

Mr Mersch commented:

‘The economy is certainly giving good signs of stabilization… and the same goes a little bit for inflation… It will be premature to give you an answer, but we are certainly moving in the right direction, and for us central bankers, it means that we were proven right to have very accommodative monetary.’

However, concerns over the bloc’s economy continue to haunt European markets, with the UK’s departure from the European Union on the near horizon and Germany’s flagging industrial sector continuing to dampen confidence in the single currency.

Euro (EUR) investors are also awaiting tomorrow’s signing off of the US-China ‘phase one’ trade deal, which could lend the single currency some support as traders become more optimistic that the Eurozone’s powerhouse economy could improve as foreign trade relations improve.

GBP/EUR Exchange Rate Edges Higher as Boris Johnson Says UK-EU Brexit Deal is ‘Epically Likely’

The Pound (GBP) edged higher against the Euro (EUR) after Prime Minister Boris Johnson commented that a UK-EU trade deal had become ‘epically likely’, which has eased some fears that the UK could leave the EU without a deal by the end of this year.

However, following this week’s downbeat assessments from various members of the Bank of England’s Monetary Policy Committee, UK markets have remained relatively downbeat today.

This follows a comment made by Mark Carney, the BoE’s Governor, last week. He said:

‘With the relatively limited space to cut Bank rate, if evidence builds that the weakness in activity could persist, risk management considerations would favour a relatively prompt response.’

As a result, Sterling traders will be paying close attention to UK economic data later on this week, with any further indications of a weakening economy boosting the odds of a rate cut and slashing the GBP/EUR exchange rate.

EUR/GBP Outlook: Could Safe-Haven Demand for EUR Sink After US-China Trade Deal?

Pound traders will be looking ahead to tomorrow’s release of December’s UK inflation figure, which is expected to hold steady at 1.5% year-on-year. However, as this continues to fall below the central bank’s expectations, we could see the Pound sink on heightened fears of an interest rate cut.

Euro investors, meanwhile, will be paying close attention to the Eurozone’s industrial production figure for November, which is forecast to improve from -0.5% to 0.3%.

However, US-China trade developments will continue to dominate market attention. If Washington and Beijing do finally sign the agreement, we could see the Euro suffer as traders seek out riskier assets.