GBP/EUR Exchange Rate Slumps Following Draghi’s Speech and Brexit Chaos
The Pound Sterling Euro (GBP/EUR) exchange rate has slumped this morning, with Brexit chaos taking the spotlight again as Prime Minister Theresa May is set to take the next two weeks to campaign for the Withdrawal Act that was accepted by EU member states on Sunday.
Adding to the pressure on GBP, in a speech yesterday the President of the European Central Bank (ECB), Mario Draghi confirmed the Bank is set to start winding down its €2.6 trillion bond-buying programme, but did not want to spook investors, as the programme has been credited with elevating growth in the Eurozone economy.
Draghi also emphasised that the recent slowdown in the Eurozone was not serious and it was only temporary, and it came after a period of strong growth and job creation.
Sabine Lautenschlaeger, a member of the ECB’s executive board stated she was confident that the bank would start raising short-term interest rates in 2019, which are currently set at -0.4%.
GBP/EUR Exchange Rate Volatile as DUP Brands Withdrawal Act ‘Worse Than No Deal’
The GBP/EUR exchange rate remained volatile at the beginning of the session this week, as Theresa May begins her task of convincing an increasingly divided Parliament that the Withdrawal Act is the best deal that the UK is going to get in regard to leaving the European Union.
The Prime Minister faces opposition from the Democratic Unionist Party (DUP), as they have said they cannot support the Act, as it treats Northern Ireland differently from the rest of the UK.
DUP leader, Arlene Foster said that the agreement ‘goes against everything’ they had been promised, and the party has stated that it is ‘worse than no deal’.
GBP/EUR Exchange Rate Buoyed By Weak German Figures
Data released on Monday showed that German business morale was worse than expected in November, with the IFO showing sentiment worsened for the third month in a row.
Fiona Cincotta, senior market analyst at City Index said:
‘Weaker-than-forecast Ifo business sentiment data, in addition to Draghi’s acknowledgement of a recent softening in Eurozone data unnerved Euro traders, sending the Euro lower.’
News also emerged yesterday that the tensions between Rome and Brussels looks set to lessen, with Italy’s coalition government possibly agreeing to reduce their 2019 budget deficit target to as low as 2%.
GBP/EUR Exchange Rate Volatile as Brexit in the Spotlight
For the UK currency, Brexit will remain in the spotlight, as Theresa May attempts to sell her Withdrawal Act to Parliament, with it remaining highly likely that this will cause the Pound to remain volatile over the rest of this week’s session.
The latest German consumer confidence index is scheduled to be released tomorrow for December, and if the figures contract as predicted, it could see Sterling push back against the Euro.
Also due to be released on Wednesday is the Financial Stability Report, released by the Bank of England (BoE).
If the BoE seems hawkish about the financial outlook it could see Sterling bolstered and push back against the Euro and other major currency pairings.
The latest German unemployment figures are set to be released on Thursday, and if the figures are as predicted, and they remain steady at 5.1%, it could see the Euro hold steady against the Pound (EUR/GBP).