EUR/GBP Exchange Rate Steady, BoE Rate Cut Fears Continue to Haunt Sterling
The Pound to Euro exchange rate held steady today, with the pairing currently trading around €1.176 after Prime Minister Boris Johnson’s Brexit bill cleared the House of Commons yesterday with a majority of 99, clearing the track for the UK to leave the EU on the 31st January.
Sterling remain on alert, however, as the Bill now heads for the House of Lords of examination and more challenging reading. Nevertheless, the Bill is expected to pass through and swiftly pass over into legislation.
After yesterday’s dovish comments from Mark Carney, the Governor of the Bank of England (BoE), in which he hinted that the central bank could cut interest rates in the near-term, the GBP/EUR exchange rate has remained flat.
Mr Carney said:
‘With the relatively limited space to cut Bank Rate, if evidence builds that the weakness in activity could persist, risk management considerations would favour a relatively prompt response.’
The GBP/EUR exchange rate has remained subdued, however, as markets are becoming increasingly jittery over the British economy as uncertainty over trade deals post-Brexit begin to concern Sterling investors.
EUR/GBP Exchange Rate Steady, Could the Euro Rise on a Weakening American Economy?
The Euro (EUR) failed to gain on the Pound (GBP) with a lack of European economic data having single currency investors turning to the North American employment reports for direction.
We could see the Euro begin to rise if the US employment report indicates a downturn in America’s job sector, as this could further push the Federal Reserve to adjust its monetary policy and potentially edge it closer to making a rate cut.
With the single-currency being negatively-correlated to the US Dollar, any signs of a weakening American economy is Euro-positive.
In European economic news, today saw the release of November’s French industrial output figure, which fell below forecasts from 0.6% to -0.1% due to languid global demand.
This follows on from weak German industrial figures – representing the Eurozone’s largest economy – for the same month, increasing market concerns over the bloc’s economic health going into the New Year.
Dr. Andrease Rees, Chief German Economist at UniCredit Bank, commented:
‘The latest November reading for industrial production is not the start of further strong rises in industrial production in the next few months. However, and instead, it probably signals the gradual bottoming out of the sustained dry spell in German industrial activity.’
EUR/GBP Outlook: Could Sterling Sink on Further Brexit Hurdles?
Sterling traders will be looking ahead to Monday’s release of November’s manufacturing production figure, which is expected to dip by -0.2%.
Monday will also see the release of the final GDP figure for November, which is forecasts to remain flat at 0%.
As a result, we could see Sterling begin to fall with weak economic data as this could further raise fears of an interest rate cut from the Bank of England.
Euro investors will be looking ahead to Thursday’s release of the German inflation date for December, with any signs of a flagging economy in the Eurozone’s powerhouse providing EUR-negative.
Brexit will continue to drive the GBP/EUR exchange rate next week, with any further obstacles either from the House of Lords or the European Union weakening the Pound on heightened uncertainty in the year ahead.
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