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GBP EUR Climbs Away from Seven-Year-Low despite Brexit Anxiety

  • GBP EUR Continues to Trade Near 1.10 – Hits fresh seven-year-low of 1.1021
  • Brexit Negotiations Have Not ‘Begun Well’ – Former UK official expresses concerns
  • GBP Forecast: UK Trade Balance on Thursday – As well as manufacturing production
  • EUR ForecastGerman Inflation on Friday – Could alter ECB speculation

Updated 12:55 BST 09/08/2017:

Despite the Eurozone’s decent data on Wednesday, it was not influential enough to boost market demand for the already strong Euro.

As a result, the GBP EUR exchange rate was able to continue climbing away from yesterday’s lows.

However, the pair has been unable to hold this week’s high of 1.1094 and generally trends closely to the week’s opening levels of 1.1072.

Italy’s June industrial production results improved to 1.1% month-on-month and a strong 5.3% year-on-year, but investors largely overlooked the result.

[Previously updated 16:49 BST 08/08/2017]

GBP EUR Edges Away from Year’s Low on Tuesday Afternoon

After sliding earlier in the day and hitting a new seven-year-low of 1.1008, the pair faced key support levels and recovered slightly.

GBP EUR trended in the region of 1.1044 at the time of updating.

Despite a lack of market interest in buying the Pound this week, the undervalued currency recovered slightly, partially due to a lack of Euro demand.

The pair could continue to trend within a relatively narrow range on Wednesday, as the day’s Eurozone data is unlikely to inspire any shift in trajectory.

[Previously updated 12:34 BST 08/08/2017]

Sterling demand has been poor so far thus week and the GBP EUR exchange rate has continued to edge lower.

By Tuesday morning, GBP EUR had hit yet another 2017 low of 1.1021, the pair’s lowest level since March 2010.

The Euro remained sturdy, largely unaffected by the day’s mixed Eurozone ecostats.

Germany’s wide trade surplus deepened to €22.3b. On the other hand, France’s trade deficit was lighter than expected and The Netherlands saw inflation rise from 1.1% to 1.3% in July.

[Published 06:00 BST 08/08/2017]

Investors haven’t been eager to buy the GBP EUR exchange rate up from its lows, as the pair continued to edge lower on Monday in response to the latest concerns and uncertainties about the ongoing Brexit process.

GBP EUR tumbled from 1.1174 to around 1.1072 last week, largely due to a dovish Bank of England (BoE) meeting. On Monday the pair edged lower again and hit a new 2017 low of 1.1035 – its worst level since 2010.

Pound (GBP) Unable to Recover on Renewed Brexit Jitters

A lack of key UK datasets due this week until Thursday could have given markets the opportunity to buy the cheap and undervalued Pound back from its lows.

However, fresh concerns about the ongoing Brexit process left pressure on Sterling, causing GBP EUR to slip to a new 2017 low yesterday.

According to Sir Simon Fraser, former UK chief mandarin, the UK side has been a bit ‘absent’ in formal Brexit negotiations in Brussels due to divisions in the UK government Cabinet.

In a Monday interview with BBC Radio 4, Sir Fraser stated;

 ‘The negotiations have only just begun, I don’t think they have begun particularly promisingly, frankly, on the British side.

We haven’t put forward a lot because, as we know, there are differences within the Cabinet about the sort of Brexit that we are heading for and until those differences are further resolved I think it’s very difficult for us to have a clear position.’

Sir Simon currently advises businesses on Brexit and the Brexit process.

Reports also emerged over the weekend that the UK government would pay a €40b Brexit divorce bill, though this figure has since been denied by government officials from No 10.

These latest Brexit uncertainties have kept pressure on the Pound, preventing it from recovering from August’s dovish Bank of England (BoE) policy decision.

Last week the BoE cut its UK growth and wage growth forecasts, as well as issuing fresh warnings on how the Brexit process could impact Britain’s economy.

Euro (EUR) Sturdy Despite Yesterday’s Mixed Eurozone Data

Monday’s Eurozone ecostats didn’t offer investors much reason to buy the Euro, but it appears markets haven’t needed a reason to keep buying the recently strong shared currency.

Germany’s industrial production report for June came in well short of expectations, slumping from 1.2% to -1.1% and missing the projected 0.2%.

Ongoing hopes that the European Central Bank (ECB) could take a hawkish stance on monetary policy towards the end of the year have kept the shared currency highly appealing.

The ECB’s July policy decision saw President Mario Draghi indicate that the bank would begin to discuss the next actions for quantitative easing (QE) sometime before the end of the year.

Markets took this signal to mean that QE could begin to be withdrawn as early as December or January.

Since then, ECB officials have not doused hopes with any notably dovish comments. This has left markets hopeful that Draghi wasn’t misinterpreted and that the ECB could indeed take a more hawkish stance soon.

The Euro has also benefitted from weakness in its rival the US Dollar (USD). Besides a brief boost in USD demand late last week, the currency has seen limited demand and analysts generally perceive the Euro to have more upside risks than the US Dollar.

GBP EUR Forecast: Notable German Data Due This Week

Tuesday will see the publication of Germany’s June trade surplus update, with Germany’s final July Consumer Price Index (CPI) report coming in at the end of the week.

Other notable Eurozone data on the way includes inflation stats from The Netherlands, Spain, Italy and France, as well as French and Italian trade balance results.

All of this week’s notable UK data will be published on Thursday, including Britain’s June trade deficit update. If Britain’s deficit lightens more than expected, the Pound could see some late-week strength.

UK Manufacturing and industrial production results from June will also be published.

On top of economic data, any developments in Brexit talks could influence Pound exchange rates.

Investors are currently anticipating the release of various Brexit policy papers, which the UK government announced it would be publishing in the coming weeks.

Overall, unless Eurozone data or Brexit news surprises investors in the coming days the GBP EUR exchange rate could remain relatively limp until later in the week.