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Euro Pound (EUR/GBP) Exchange Rate Sinks, Eurozone Inflation Revised Down in September

European Central Bank

EUR/GBP Exchange Rate Eases on Eurozone’s Economic Woes

The Euro Pound (EUR/GBP) exchange rate eased today, with the pairing currently trading around £0.8616 after the Eurozone’s inflation figure for September was unexpectedly revised down from 1% to 0.8%.

Francesco Guarascio, an Analyst at Reuters, was downbeat in his assessment:

‘The drop is likely to raise new concerns on the state of the euro zone economy and may reignite a debate within the European Central Bank on how to pursue its goal of keeping inflation close to but below 2% over the medium term.’

Euro traders will be looking ahead to today’s speech by Dr Jens Weidmann, the President of the Deutsche Bundesbank. Any dovish comments about the flagging German economy could, however, see the European currency sink deeper against the Pound.

Brexit developments are also remaining in focus for Euro trader today. European markets are, however, becoming increasingly jittery ahead of tomorrow’s European Council Summit, which will effectively determine whether the UK will leave the EU with a deal this month or not.

GBP/EUR Exchange Rate Edges Higher on Renewed Hopes of a Brexit Extension

The Pound (GBP) edged higher against the Euro after the EU’s Chief Brexit Negotiator, Michel Barnier, buoyed UK market sentiment after saying that he was optimistic that a UK-EU Brexit deal could be secured by the end of today.

A senior EU diplomat however added:  

‘We are still waiting for a signal from across the Channel. A lot of things are happening between the cabinet, DUP, and the hardest Brexiters.’

However, optimism has been tempered by the Irish Prime Minister Leo Varadkar warned that an extra EU summit may be required to address the ‘many issues’ in the withdrawal agreement that remain to be resolved.

In UK economic news, today saw September’s UK inflation figure held steady at 1.7%. However, with Brexit developments dominating UK market attention, ecostats have left Sterling little changed.

Naeem Aslam, an Analyst at ThinkMarkets, commented:

‘In terms of UK’s CPI data, there wasn’t anything exciting at all and this is the reason that sterling didn’t move on the back of this number. For traders, the focus is Brexit and the fear of deal slipping away is creating the selling pressure on sterling’

EUR/GBP Outlook: Brexit Developments in Spotlight

Sterling traders will be looking ahead to tomorrow’s release of September’s retail sales figure, which is expected to flatline at 0%.

Meanwhile, Euro traders will be looking tomorrow’s release of the Eurozone’s construction output figure for August for any further indications of the Eurozone’s economic recovery.

Brexit developments will remain in the driving seat for the EUR/GBP exchange rate for the rest of this week. Any signs of a UK-EU Brexit breakthrough would see the Sterling soar as fears of a no-deal this month would diminish.