Strengthening Pound Sterling Reduces Demand for Riskier Euro
The Euro (EUR) has dropped off against the Pound (GBP) and most other peers today, with a stronger Pound Sterling making the single currency less appealing.
A lack of supportive Eurozone data hasn’t helped matters, as Euro traders are still concerned about the ongoing Italy-European Commission (EC) budget clash.
Italian Prime Minister Giuseppe Conte has expressed optimism in working out the issues with the EC, but today’s Euro losses suggest that traders aren’t convinced.
Speaking earlier today, Mr Conte said:
‘This government is an expression of demands for change, and it is natural that European markets and institutions want to understand in which direction we intend to move.
‘But I am confident that in our discussions with the European Commission, we will be able to demonstrate the goodness of a growth manoeuvre such as the one we have planned in order to change Italy.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate Rises 0.3% on Brexit Deal Hopes
The Pound (GBP) has traded higher against the Euro (EUR) today, nearing the best exchange rate in about a week.
This appreciation comes from rumours of an imminent conclusion to Brexit talks, although it is worth mentioning that the original story has been revised.
GBP traders seized on a letter from Brexit Secretary Dominic Raab which suggested that Brexit talks could be wrapped up by 21st November.
Mr Raab quickly backtracked and clarified that the named date was when the Chair of the Select Committee for the Secretary of State would be giving evidence.
Despite the clear-up, the Pound has remained in high demand today and reports of a UK-EU deal for financial services have only strengthened the UK currency.
Euro to Pound Sterling Exchange Rate Forecast: Are EUR/GBP Losses ahead on BoE Meeting?
The Euro (EUR) risks making additional losses against the Pound (GBP) in the near-future, when Bank of England (BoE) policymakers meet this afternoon.
BoE officials will be meeting to discuss interest rates, as well as unveiling their economic outlook for the coming months.
In the best case scenario for GBP traders, BoE policymakers could show an optimistic outlook for 2019 and hint at an interest rate hike in the year ahead.
GBP traders are concerned that the BoE could hold off on adjusting interest rates because of the Brexit process, so any reassurance would likely be welcomed.
Looking beyond today’s events, the Euro could extend any additional EUR/GBP exchange rate losses on Friday when Eurozone PMI data is released.
Covering reported manufacturing sector activity in October, the finalised readings are expected to show a slowdown across the board.
Slower Eurozone and German manufacturing would be particularly damaging to Euro demand, so the single currency could slump if the PMI readings disappoint.
This week’s last notable news will come from the UK, with October’s construction PMI due out on Friday morning.
A minimal slowdown in the pace of sector activity is forecast – such a result could limit any GBP/EUR exchange rate gains into the weekend.