Growing UK Government Debt Fails to Trigger GBP/EUR Exchange Rate Decline
Pound Sterling (GBP) has held close to opening levels in trading against the Euro (EUR) today, following the release of UK government debt data.
This has been a measurement of government borrowing for the public sector, which has shown an expansion from May’s deficit of £-3.85bn to £-4.53bn in June.
This was a larger deficit figure than had been forecast, but historically the first three months of the financial year have had the lowest borrowing since 2007.
It is worth bearing in mind that this reading comes during the Brexit process; the Office for National Statistics (ONS) estimates larger deficits after Brexit.
In other news, Pound to Euro (GBP/EUR) exchange rate gains have also been prevented by a leaked speech from Prime Minister Theresa May.
Mrs May is expected to reject current EU proposals to give Northern Ireland a different customs deal to the UK after Brexit, which risks turbulence.
The issue of the Irish border has been unresolved since Brexit talks began over two years ago and Mrs May’s speech could be another setback in negotiations.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Steady on US Trade Tariff Fears
The Euro (EUR) has been unable to advance against the Pound (GBP) today because of similar economic issues in the Eurozone that have limited EUR trader confidence.
In the Euro’s case, this is the danger of another escalation in the US-EU trade war, which could take the form of greater tariffs imposed against EU vehicle exports.
As well as imposing charges on the import of EU vehicles into the US, the US has also proposed charges on vehicle components and parts.
If enacted, the tariffs would make it significantly more expensive to send vehicles from the EU to the US or vice versa, which would harm EU nations like Germany.
In a pre-emptive statement for any further escalation, EU Trade Commissioner Cecilia Malmstrom warned:
‘If the US would impose these car tariffs, that would be very unfortunate.
‘We are preparing together with our member states a list of rebalancing measures there as well. And we have made that clear to our American partners.’
Pound Sterling to Euro Exchange Rate Forecast: Can GBP/EUR Rise on UK Business Data?
The Pound (GBP) has a chance to advance against the Euro (EUR) in the coming week, mainly over Tuesday and Wednesday’s Confederation of British Industry (CBI) data.
This will consist of a measure of industrial orders on Tuesday, followed by Wednesday’s distributive trades and business optimism figures.
Two of three readings are tipped to print positively, which might bring overall Pound to Euro (GBP/EUR) exchange rate gains.
Although the measurement of distributive trades is predicted to slow from 32 points to 21, business optimism is forecast to rise alongside reported industrial orders.
On the other side of the pairing, the Euro could be influenced by a Eurozone consumer confidence flash on Monday and Tuesday’s German and Eurozone PMIs.
This data might ultimately weaken the Euro and enable a GBP/EUR advance, as lower consumer confidence and a mix of Eurozone PMI readings have been forecast.