GBP/EUR Exchange Rate Rangebound, Brexit Remains in Focus for January
The Pound Euro (GBP/EUR) exchange rate held steady this morning, with the pairing currently trading around €1.179 as UK markets become increasingly jittery ahead of the 31st January Brexit leaving date.
Samuel Tombs, Chief UK Economist at Pantheon, comments:
‘We do not know the strength of Euroscepticism among the new intake of Conservative MPs. And the PM is doubling-down on the commitment in the Tory manifesto to not extend the transition period beyond December 2020, by setting it into the Withdrawal Agreement Bill that MPs will sign-off in January. The stage is set, therefore, for Brexit risk to dampen the economy again in the second half of next year.’
In UK economic data, today will see the release of the UK Markit Manufacturing PMI figure for December, which is expected to improve slightly from 47.4 to 47.6.
However, this is unlikely to boost the GBP/EUR exchange rate as the British industrial sector continues to remain in contraction territory.
EUR/GBP Exchange Rate Steadies as Hopes for German Economy Improve
The Euro (EUR) failed to gain on Sterling following this morning’s release of Germany’s Markit Manufacturing PMI for December, which beat forecasts and rose from 43.4 to 43.7.
Phil Smith, Principal Economist at IHS Markit, was upbeat in his analysis, however, saying:
‘Importantly, however, the forward-looking survey measures for new orders and output expectations both give off more positive signals as we move into the New Year. What’s more, the US-China ‘phase one’ trade deal and a potentially clearer path to Brexit make for a more settled backdrop on the international stage.’
Today also saw the French Markit Manufacturing PMI figure for December beat forecasts and rise to 50.4.
Disappointing news on #France as #PMI shows #manufacturing expansion slowed markedly in December & marginal (PMI at 3-month low of 50.4 (flash reading was 50.3; 51.7 in November). Output growth slight; new orders contracted anew. Jobs flat. Confidence lowest since April 2016
— Howard Archer (@HowardArcherUK) January 2, 2020
Meanwhile, US-China trade developments continue to drive optimism in the single currency, after US President Donald Trump announced that he expects the US-China ‘Phase One’ trade deal to be signed on 15th January.
With Germany’s economy being particularly reliant on global trade, this has boosted confidence in an imminent recovery for the Eurozone’s largest economy.
GBP/EUR Outlook: Could the Euro Rise on US-China Trade Deal Hopes?
Pound (GBP) investors will be looking ahead to tomorrow’s release of the UK Mortgage Approvals figures for November, which are expected to dip from 64.602 thousand to 64.45 thousand.
Meanwhile, Euro (EUR) traders will be bracing for tomorrow’s publication of Germany’s inflation figure for December, which is expected to improve from 1.2% to 1.4%, and likely buoying confidence in the single currency.
Tomorrow will also see the release of December’s German Unemployment Figure, which is forecast to hold steady at 5%.
Brexit developments ahead of this month’s exit deadline will continue to drive the GBP/EUR exchange rate this week, with any further signs of uncertainty between UK-EU relations going into the New Year weakening market confidence in the Pound.
Also, any improvement in US-China trade relations ahead of the 15th January trade deal could provide some uplift for the Euro as traders become increasingly optimistic for the bloc’s economic recovery.