The Pound Euro (GBP EUR) exchange rate continued to be limited by the Brexit negotiation deadlock on Wednesday, with prominent MP’s and the Irish Democratic Unionist Party (DUP) expressing surprise and frustration over the push to give Northern Ireland to the EU in exchange for trade talks.
Eurozone Data Proves Mixed, GBP EUR Exchange Rate Remains Limited
Data from the bloc on Wednesday proved somewhat mixed. On one hand, Germany’s latest construction purchasing manager’s index (PMI) dropped to 53.1 in November, down from October’s 53.3 (the slowest rate of expansion within the sector for some 10 months).
On the other hand, industrial orders soared.
Contributing to the disappointing construction reading was a fall in new orders, which dropped for the first time in over a year and a drop in employment, purchasing activity and input cost inflation (which fell to a four-month low).
Germany’s monthly industrial orders, however, increased by 0.5% in October, smashing the market forecast of a -0.3% fall and beating the previous period’s upwardly revised 1.2% gain.
Bolstering the figure was an increase in domestic demand and overseas orders, ultimately pointing to on-going growth for the bloc’s largest economy.
This news helped bolster the Euro, though its upward potential continues to remain limited in light of relative strength in the US Dollar (USD), particularly in response to rate hike anticipation for the US Federal Reserve and indeed hopes regarding the Republican tax reform.
GBP EUR Exchange Rate Flounders as Brexit Negotiations Fail to Demonstrate Progress
The Pound continued to flounder on Wednesday after the recent collapse in negotiations on the subject of the Irish border, with many prominent Conservatives upset that UK Prime Minister Theresa May attempted to push for regulatory alignment between Ireland and Ulster without briefing senior ministers.
DUP leader Arlene Foster expressed similar surprise over these tactics and told the Prime Minister that she would not support a deal that put Northern Ireland under a different ruleset to the rest of the UK.
This caused negotiations to buckle at the 11th hour, leaving London and Brussels without a Brexit deal and time before the Brexit summit quickly ticking away.
So where does that leave the UK?
Markets are currently apprehensive that a deal will not be successfully made in time for next week’s Brexit summit, an eventuality that could leave UK businesses floundering in uncertainty even longer.
May is now in the process of talks with the DUP in an attempt to fix this impasse, though whether she will be successful remains to be seen.
Any news of progress could give the Pound some purchase.
Conversely, perpetuation of this deadlock will leave GBP EUR in the Euro’s favour.
GBP EUR Exchange Rate Forecast: Notable Ecostats on the Horizon
In respect to important data tomorrow; markets will be keeping a keen eye on the Eurozone GDP readings, though economists do not expect growth to shift from 0.6% quarter-on-quarter and 2.5% year-on-year.
Germany’s industrial production is also due for release and expected to soar from the previous contraction of -1.6% to 2.2%, an eventuality that could further cement the Euro’s lead.
In regards to the Pound, Brexit negotiations will once again take centre stage tomorrow, with Halifax house price readings also due.
Friday, however, will see the release of UK industrial production readings, manufacturing production readings, construction output figures, the UK’s trade balance, and the NIESR GDP estimate, a large run of prints that could steal back the spotlight.