Euro to Pound Exchange Rate Holds Recovery despite Higher UK Inflation Data
Despite some stronger than expected UK data and a lack of notable support for the Euro (EUR), the Euro to Pound Sterling (EUR/GBP) exchange rate has been able to hold most of the strong recovery it has seen over the past few days.
Following last week’s tumble from 0.8418 to 0.8340, EUR/GBP has already regained those notable losses and then some.
EUR/GBP regained over a pence yesterday alone, and this morning touched on a fresh fortnight high of 0.8513. At the time of writing on Wednesday afternoon, EUR/GBP continues to trend relatively close to those highs.
The Pound (GBP) gave up its election-related gains due to a fresh round of fears that the Brexit process could end with a cliff-edge scenario. The Euro has benefitted more from mixed strength in rivals.
Euro (EUR) Exchange Rates Steady as German Ifo Survey Beats Forecasts
Market demand for the Euro has been fairly resilient in recent sessions, due to a number of factors.
The primary reason for Euro strength has been weakness in rival currencies, such as the Pound’s Brexit-related losses and the US Dollar’s (USD) weakness on trade-sentiment and Fed speculation.
However, signs of strength in recent Eurozone data have also supported the shared currency’s appeal.
While Eurozone manufacturing stats have been poor this week and Eurozone inflation was unsurprising, today’s German business sentiment stats from Ifo came in higher than forecast in every notable print.
According to Carsten Brzeski, Chief Economist at ING:
‘This positive Ifo reading brings a conciliatory end to the economic year 2019. It ends the year on a positive note and with the hope for a rebound in 2020. However, as much as we would like to see the German economy leaving the stagnation territory behind, truth is that any tangible bottoming out is still hard to find.’
Pound (GBP) Exchange Rates Remain Weak after Hard Brexit Threat Throttling
The Pound’s optimism over the new Conservative majority government was short-lived, as market hopes for a softer Brexit outcome took a hit yesterday.
UK Prime Minister Boris Johnson indicated that he would take an extension to the Brexit transition period off the table, heavily limiting the amount of time available for the next phase of Brexit negotiations.
Fears of a 2020 filled with Brexit uncertainties quickly dominated the market outlook yesterday, causing the Pound to plummet.
Today, investors continued to digest the reality that the Brexit process was far from sure to see a soft outcome amid expectations for a year more uncertainty. This kept the Pound weak.
The latest UK inflation rate report, published today, showed that inflation was slightly stronger than forecast. However, this was unable to give investors much fresh reason to buy the Pound.
Euro to Pound (EUR/GBP) Exchange Rate Awaits Brexit and Bank of England (BoE) News
With this week’s Eurozone data having been largely mixed but optimistic enough to keep the Euro supported, the Euro to Pound (EUR/GBP) exchange rate may be more influenced by Pound movement towards the end of the week.
French business confidence data will be published tomorrow, with German and Eurozone confidence following on Friday, but upcoming Bank of England (BoE) news and potential Brexit developments will be more influential.
Tomorrow’s BoE policy decision could see the bank reacting to last week’s UK General Election results and the new government’s Brexit plans.
If the bank remains cautious or even becomes more dovish due to political news, the Pound may be in for fresh losses.
Sterling’s weakness on hard Brexit fears could also deepen if UK Parliament pushes through a plan to prevent an extension to the Brexit transition period.
Overall, UK politics and Brexit will once again be a core influence for the Euro to Pound (EUR/GBP) exchange rate in the coming days.