EUR/GBP Exchange Rate Flat, Global Trade Developments in Focus
The Euro to Pound (EUR/GBP) exchange rate held steady this morning, with the pairing currently trading around £0.857 after the year-on-year German Harmonized Index of Consumer Prices confirmed consensus and rose by 0.9% in October, despite ongoing fears of a technical recession for the Eurozone’s powerhouse economy.
Meanwhile, European markets are remaining cautious over US President Donald Trump’s threat to escalate the US-China trade war, which could further damage Germany’s fragile economy in the coming months.
Mr Trump said yesterday:
‘If we don’t make a deal, we’re going to substantially raise those tariffs. They’re going to be raised very substantially. And that’s going to be true for other countries that mistreat us too.’
The EUR/GBP exchange rate has remained steady, with rising concerns that Mr Trump could also be referring to the EU after temporarily delaying a tariff hike on European automobiles and vehicle parts.
Euro (EUR) traders will be looking ahead to today’s release of the Eurozone’s industrial production figure. With the figure expected to fall from 0.4% to -0.3%, we could see the Euro begin to ease against Sterling.
GBP/EUR Exchange Rate Rangebound, UK Inflation Sinks to Lowest Since 2016
The Pound (GBP) struggled to gain against the Euro (EUR) following the release of October’s UK inflation figure, which fell to its lowest level since 2016 at 1.5% and further dampened market confidence in the British economy.
UK CPI inflation down from 1.7%y/y in Sep to 1.5%y/y in Oct. Core inflation held steady at 1.7%y/y. Gas, electric & other fuels were the main downward push (result of Ofgem's energy price cap). Clothing & footwear the main upward push on inflation. RPI: 2.1%y/y CPIH: 1.5%y/y. pic.twitter.com/g10PSXLCXJ
— Rupert Seggins (@Rupert_Seggins) November 13, 2019
Analysts at Reuters commented:
‘The Bank of England [BoE] said last week that inflation would probably fall to 1.25% early next year due to caps on energy and water prices, but was likely to be back above its 2% target towards the end of its three-year forecast period. The BoE has long said it plans to raise interest rates gradually, assuming Britain avoids a no-deal Brexit shock.’
Today also saw October’s UK Retail Price Index for October fall by -0.2% as Brexit uncertainty continues to weigh on the British retails sector.
UK markets were left unmoved however as political developments have remained in focus ahead of the 12th December general election.
EUR/GBP Outlook: Could the Euro Sink on German Recession Fears?
Euro (EUR) investors will be awaiting tomorrow’s release of the preliminary German growth figure for the third quarter, which is expected to ease by -0.1%. Any indications that the Eurozone’s largest economy could face a recession tomorrow will weaken the EUR/GBP exchange rate.
Sterling traders will be looking ahead to tomorrow’s release of the UK retail sales figures for October, with sales expected to improve from 3.1% to 3.7% on the year.
However, ongoing British political developments are likely to drive the Pound to Euro exchange rate for the rest of this week.