The latest gloomy predictions for the UK economy have softened GBP EUR exchange rates, as hope emerges for the creaking Italian banking sector.
- GBP EUR exchange rates edge lower – BCC forecasts slowing UK economy
- EUR advances on hopes for Italy’s banks – Reuters claims government could step in
- GBP EUR volatility forecast tomorrow – UK CPI and Eurozone ZEW surveys due
Suggestions the Italian government is prepared to step in and recapitalise Monte dei Paschi, should a private investment drive fail, have helped prop up the Euro today. Sentiment had previously been harmed by the European Central Bank’s (ECB) refusal to extend Monte dei Paschi’s deadline for raising the capital required to deal with bad loans.
Pound Declines as Markets Focus on UK Employment Slowdown
Update, 11.50, 14/12/16; Mixed data from the UK labour market has tipped the Pound into a decline today. Average earnings growth clocked in twenty basis points above forecast; a positive sign that consumers will be able to better deal with rising inflation. The improvement in the claimant count change was somewhat mooted, however; although it clocked in over -3,000 new claims below forecast, October’s figure was revised higher by 4,500. Even worse for investors was the news that employment fell for the first time in a year after forecasts of 50,000 newly employed were dashed by a -6,000 drop in the number of employed.
GBP EUR Exchange Rates Hold Gains after Greek Finance Minister Criticises IMF
Update, 13/12/2016; Eurogroup has now gotten involved in the Greek debt debate sparked by the IMF this morning. In a rather backhanded response, a spokesperson for the European Stability Mechanism (ESM) commented that they were ‘surprised’ the IMF had published a post on Greece’s current situation and noted that ‘We hope that we can return to the practice of conducting program negotiations with the Greek government in private.‘
Update, 13/12/2016; In a strange twist to the latest Greek bailout drama, the country’s Finance Minister has now hit back at the IMF. While the Fund claimed it was not attempting to raise the austerity requirements attached to the Hellenic nation’s bailout, Euclid Tsakalotos claimed the IMF was ignoring the consequences of its demands and focussing on making ‘the numbers add up’.
GBP EUR Advances as IMF Lashes Out at Greek Bailout ‘Misinformation’
Update; The Euro has fallen today after the International Monetary Fund (IMF) published a blog post refuting the notion it was seeking more austerity measures to be implemented in Greece as a precondition for its involvement in the nation’s bailout deal. The move is further evidence that huge tensions remain between the IMF – which is not currently involved in the bailout – and Eurogroup. The two groups have long been at loggerheads over Greece’s debt burden; the IMF claims the restrictions placed upon Greece under the terms of the bailout are too harsh and will impede recovery.
Pound Euro Exchange Rate Slips below Opening Levels after BCC GDP Forecasts
There is nothing on the calendar for either the UK or the Eurozone to drive the GBP EUR exchange rate today, leaving sentiment in charge.
Pound Sterling has therefore descend from the day’s starting levels against the Euro, after a warning from the British Chambers of Commerce (BCC) that the UK economy is set to weakened. The group expects 2017 to see economic growth of just 1.1% – granted, a ten basis point upgrade on previous measures – while its projections for 2018 have been cut from 1.8% to 1.4%.
BCC Director General Adam Marshall explained;
‘In the absence of a clear road ahead, many companies have been adopting a ‘business as usual’ approach in the months since the referendum, which has kept conditions buoyant this year and prevented a sharp slowdown in growth.
While some firms see significant opportunities over the coming months, many others now see increasing uncertainty, which is weighing on their investment expectations and forward confidence. Lower Sterling and rising inflation are now starting to affect business communities and consumers across the UK.’
Uncertainty over Italian Banks Keeps EUR GBP under Opening Levels
The markets remain focussed on the continued precariousness of the Italian banking sector today, but fresh hope has fuelled appetite for the Euro. Shares in Italy’s biggest financial headache – Monte dei Paschi – have surged following soothing comments from Pierre Moscovici; the EU Economics Commissioner. In a radio interview this morning, Moscovici was able to calm investor tensions after dismissing the idea of an Italian banking crisis, or of a European banking crisis stemming from Italy.
Further inspiring Euro gains is the growing belief that Monte dei Paschi will receive the €5 billion of capital it desperately needs to deal with its huge pile of bad loans. The Italian government allegedly continues to hold out hope that investors will be willing to stump up the cash themselves, preventing the need for any state interference.
Reuters reports that a Treasury source has told them;
‘There is confidence at the economy ministry that Monte dei Paschi’s cash call can succeed. If the operation failed, the state would carry out a precautionary recapitalisation. The bank’s existence and its clients’ savings will be preserved under any circumstances.’
GBP EUR Exchange Rate Forecast; Volatility Expected Tomorrow on Packed Data Docket
While the rest of today promises to be something of a washout, unless decisive news regarding Brexit or Italian banks should materialise, tomorrow should see market liquidity pick up.
Both the UK and the Eurozone have high-profile data releases scheduled; November consumer price indices and ZEW sentiment surveys respectively. UK inflation is expected to have picked up to 1.1% for overall prices and to 1.3% for the core index. This is likely to soften the Pound as markets brace for the inevitable overshoot of the Bank of England’s (BoE) 2% target predicted by experts. The Eurozone ZEW surveys for Germany and the currency union as a whole are all expected to improve, although the surrounding German and Spanish inflation reports, coupled with Italian industrial production data, could sour the Euro outlook if these all largely disappoint.
Interbank GBP EUR Exchange Rates
At the time of writing, GBP EUR exchange rates were trading around 1.18, while EUR GBP exchange rates trended around 0.84.