Pound to Euro Exchange Rate Fluctuates as Investors Digest US-China Trade Developments
After slipping last week on Brexit jitters, the Pound Sterling to Euro (GBP/EUR) exchange rate saw mixed movement when markets opened on Monday. Investors are reacting to the latest developments from the weekend’s G20 summit.
Last week saw GBP/EUR slide around a third of a cent, from 1.1307 to1.1265. GBP/EUR was able to end November away from Friday’s November lows of 1.1206, as the pair rebounded on underwhelming Eurozone inflation stats.
At the time of writing, GBP/EUR trends closely to the week’s opening levels. The Euro (EUR) is fluctuating as it is bolstered by risk-sentiment but kept under pressure amid weaker economic expectations for the Eurozone.
The biggest news for currency markets this week so far has been news that the US and China have agreed to hold a 90-day truce on new trade tariffs, in order to attempt to negotiate trade tensions between the nations.
This news has made investors more eager to take risks. The safe haven US Dollar (USD) has weakened, making its rival the Euro more appealing.
Pound (GBP) Exchange Rate Volatile with Brexit Uncertainties in Focus
The Pound (GBP) was driven largely by strength in rivals when markets opened on Monday, as continued market focus on broad Brexit uncertainties left the British currency volatile.
The primary focus for Sterling investors is now the upcoming UK Parliament Brexit vote, set for the 11th of December. The vote could decide the future of UK Prime Minister Theresa May’s negotiated UK-EU Brexit plan.
Analysts currently expect that the Brexit deal will be blocked by UK MPs during its first round through Parliament, and Prime Minister May has indicated that the government will ramp up ‘no-deal Brexit’ preparations in the event the bill fails.
The Prime Minister is currently making efforts to boost the popularity of her agreed bill. The EU has said that it will not renegotiate the bill despite pressure from within May’s Conservative Party for her to do so.
Sterling movement was little-influenced by Monday’s UK manufacturing PMI, despite it beating forecasts.
Euro (EUR) Strengthens on US Dollar (USD) Weakness
Demand for the Euro is often negatively correlated to strength in its biggest rival, the US Dollar (USD). As a result, sharp movement in the US Dollar influenced the Euro on Monday morning.
Over the weekend, the US and China announced a truce over trade-relations during the G20 summit in Argentina.
The two nations agreed to give 90 days for negotiations, putting further escalations in trade tensions on hold.
Following the news, investors became much more willing to take risks again and the safe haven US Dollar (USD) weakened. This left the Euro more appealing.
However, the Euro’s strength has been limited due to some recent disappointing Eurozone ecostats. Last week’s Eurozone inflation figures disappointed investors and dampened hopes of a more hawkish European Central Bank (ECB) any time soon.
Monday’s final November Eurozone manufacturing PMIs came in slightly better than projected, but the figures were still disappointingly low – printing below 52.
Pound to Euro (GBP/EUR) Exchange Rate Investors Await Political Developments and Eurozone Growth
With Pound investors remaining anxious about the Brexit process and the perceived popularity of UK Prime Minister Theresa May’s Brexit plan, the Pound to Euro (GBP/EUR) exchange rate may be influenced more by Euro strength for much of the week.
Demand for the Euro will be driven by US Dollar (USD) strength in the coming days, as investors continue to digest US-China trade relations and any changes in risk-sentiment. The Euro will strengthen when the US Dollar weakens.
Of course, this week’s Eurozone data has the potential to be influential as well. Eurozone services and PMI data from November will come in on Wednesday, as well as October’s Eurozone retail sales results.
These will be followed by German factory orders and construction data on Thursday, then German industrial production from October on Friday.
Perhaps the week’s most influential data will be Friday’s Eurozone Gross Domestic Product (GDP) Q3 growth projections however, which will cause Euro movement if they surprise.
Britain’s services PMI stats will come in on Wednesday, but with Sterling investors looking ahead to the December Parliamentary vote in Brexit, the Pound to Euro (GBP/EUR) exchange rate is more likely to react to Brexit developments.