Homepage » Brexit » Euro Pound Exchange Rate Holds Ground on IMF’s Fresh Brexit Concerns

Euro Pound Exchange Rate Holds Ground on IMF’s Fresh Brexit Concerns

  • Euro Pound Exchange Rate Holds Above 0.88 – Pair remains above week’s opening levels
  • Euro Holds Gains Despite Lack of Supportive Data – Investors expect strong Euro in 2018
  • EUR Forecast: Eurozone Consumer Confidence Ahead – As well as French GDP
  • GBP Forecast: UK Growth on Friday – Brexit news could continue to influence Pound

The Euro Pound exchange rate has advanced slightly this week, despite a lack of fresh market reasons to buy the Euro. The pair slipped slightly from its highs on Wednesday, but overall market demand for Sterling is limited to persistent concerns about the Brexit process.

EUR GBP has edged higher in recent weeks. Last week saw the pair rise from 0.8793 to 0.8820 and this week the pair has largely held above 0.88. The pair touched on a December high of 0.8863 on Tuesday afternoon.

Euro (EUR) Remains Appealing on Eurozone’s 2018 Outlook

Recent Eurozone data has been slightly underwhelming, but still strong enough to indicate that the Eurozone economy is seeing strong growth up until the end of 2017.

Monday’s Eurozone Consumer Price Index (CPI) results met expectations in all major prints, letting down investors hoping for stronger than expected inflation in the bloc.

Tuesday’s data was slightly disappointing too, with Eurozone wage growth slipping from 2.1% to 1.6% according to the Q3 report and adding slightly to price pressure concerns.

Ifo’s German expectations and business climate surveys fell short of expectations in December. However, analysts put the unexpected drop down to the breakdown in German coalition talks and noted that the prints were still relatively optimistic overall.

After a strong performance from the currency bloc throughout the past year, Euro investors are excited for another year of solid growth from the economy in 2018, despite concerns that Eurozone inflation will remain subdued for some time to come.

The European Central Bank (ECB) forecast in its December policy decision that price pressures were likely to remain below target until 2020 at the earliest.

This disappointed hawkish Euro traders hoping for an ECB interest rate hike within the next year or so.

Overall though, the ECB appeared optimistic on the bloc’s economy. This has kept the Euro relatively appealing, especially compared to major rivals like the Pound and US Dollar (USD) which are being held back by domestic uncertainties.

Pound (GBP) Weighed with Brexit Concerns Persisting

Recent UK data has beaten expectations, but this has been unable to help the Pound advance against the appealing Euro.

Last week saw UK inflation, wage growth and retail sales prints come in higher than expected.

Monday followed with the Confederation of British Industry’s (CBI) December industrial trends results, which came in at 17 despite being forecast to slip to 14.

This was a joint 30 year high for factory orders and caused analysts to speculate that manufacturers were running at full capacity towards then end of the year.

The CBI’s distributive trades report was published on Wednesday and slipped from 26 to 20 as expected.

Despite the decent UK data though, Sterling has been held back against the Euro due to persistent market anxiety about the second round of Brexit negotiations, set to take place throughout 2018.

Wednesday saw the International Monetary Fund (IMF) welcome the recent progress in Brexit talks, but the group believes the short time frame for UK-EU trade talks is ambitious. According to the IMF;

‘The list of tasks that remains to be accomplished is very long, and the timeframe to do so is ambitious. They include agreeing on a trade deal with the EU, negotiating new arrangements with around 60 countries to replace those to which the UK is currently party via its membership in the EU, bolstering human and IT resources in customs and other services, and translating many thousands of pages of EU law into UK domestic statute.’

Euro Pound Exchange Rate Forecast: Eurozone Confidence Stats Ahead

Data due before the end of the week could influence Euro Pound exchange rate movement slightly, but the pair is unlikely to see any more significant shifts in tone until the end of the year as markets wind down for the holiday season.

Thursday’s Eurozone data includes consumer confidence stats from the Eurozone and The Netherlands, followed by German and Italian consumer confidence on Friday.

Some final Q3 Gross Domestic Product (GDP) reports will be published on Friday too, from The Netherlands and France.

Some upcoming UK data could prove influential too. Britain’s November public sector net borrowing results will be published on Thursday, followed by final Q3 growth and business investment data on Friday.

Of course, any notable developments on Brexit, such as changes in the timing of the second phase and trade negotiations, could also influence Pound movement.

EUR GBP Interbank Rate

At the time of writing this article, the Euro Pound exchange rate trended in the region of 0.8844. The Pound to Euro exchange rate traded at around 1.1305.