Euro to Pound Exchange Rate Higher Despite Disappointing German Data
Despite fresh signs that Germany’s economy is seeing continued weakness and could remain in recession, the Euro to Pound Sterling (EUR/GBP) exchange rate is on track to see its first weekly gains since the beginning of October.
EUR/GBP saw significant losses for most of October on Brexit deal optimism, but now fresh uncertainty about that deal is weakening the Pound (GBP) again.
This week has seen EUR/GBP briefly touch on a 5-month-low of 0.8579, but the pair has gained almost half a pence from the week’s opening levels of 0.8607 and currently trends near the level of 0.8650.
Demand for the Euro (EUR) was limited, but ultimately the Pound’s movement on Brexit and election speculation drove the pair this week.
Euro (EUR) Exchange Rates Fail to Capitalise on Rival Weakness amid Poor German Data
Major Euro rivals like the Pound and US Dollar (USD) have been weaker this week, and this has been the primary cause of the Euro’s gains.
However, the Euro has been unable to properly capitalise on weakness in rivals, as this week’s German data continues to paint a gloomy picture for the Eurozone’s biggest economy.
Yesterday saw the publication of Markit’s Eurozone PMI projections for October, and every German print fell short of expectations.
The manufacturing sector improved slightly but still printed a highly concerning contraction of 41.9.
This morning’s German data was a little more mixed, with German consumer confidence falling short of expectations but business confidence beating forecasts slightly in Ifo’s business climate and expectations prints.
The strong data was not enough to offset concerns though, as analysts at GfK said the risk of recession in Germany was rising.
Pound (GBP) Exchange Rates Tumble as UK Government Announces General Election Plans
It’s been a tumultuous few weeks for the Pound and the Brexit process, but this week it seems as though the momentum behind the UK government’s Brexit plans started to run out of steam.
After finally reaching a new UK-EU Brexit deal last week, UK Prime Minister Boris Johnson’s attempt to fast-track the deal through domestic parliament was blocked.
MPs wanted more time to look over the new plan, and as a result Johnson’s government asked the EU for an extension to the Brexit process.
The government announced yesterday that it intends to hold a general election on the 12th of December, which has led to fresh political uncertainty and Pound losses.
Sterling continues to see fairly weak movement today, as investors await further news on how long the EU will extend the Brexit process.
Euro to Pound (EUR/GBP) Exchange Rate Awaits Brexit Developments
With the current Brexit date now less than a week away, still set for the 31st of October, investors are highly anticipating the EU’s decision on how long it will delay the Brexit process for.
An extension of three months is the most expected outcome, but there is some concern that the EU could withhold its decision amid uncertainty over whether or not Britain will hold a general election.
The Pound will likely see some relief when a Brexit extension is confirmed as no-deal Brexit fears will soften. However, the closer the Brexit date gets without an extension being confirmed the more jittery Sterling will get.
Brexit and UK election developments will be the primary cause of EUR/GBP movement in the coming sessions, but Euro movement could be influenced by data next week as well.
French growth stats, German unemployment data and Eurozone confidence stats will be published next Wednesday.
On top of this, any surprising news from the Federal Reserve’s October policy decision on Wednesday could also drive the Euro to Pound (EUR/GBP) exchange rate due to the Euro’s negative correlation with the US Dollar (USD).