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Pound Euro (GBP/EUR) Exchange Rate Flat as Covid-19 Main Risk to Eurozone Growth

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Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as EC Leaves Growth Forecast Unchanged

The Pound Sterling Euro (GBP/EUR) exchange rate remained flat today, leaving the pairing trading at around €1.1924.

The Euro remained flat after the European Commission left the bloc’s growth forecast unchanged for 2020 and 2021.

The EU expects moderate growth, but increased its projection for inflation, and added the spread of Covid-19 was the largest downside risk.

The EC stated:

‘The outlook for 2020 and 2021 is unchanged […] as more positive developments are counterbalanced by negative events elsewhere.’

While the phase one trade deal between the US and China removed some headwinds, the spread of Covid-19 now remained the main risk to economic growth.

The Commission added:

‘The baseline assumption is that the outbreak peaks in the first quarter, with relatively limited global spillovers. The duration of the outbreak, and of the containment measures enacted, are a key downside risk.

‘The longer it lasts, the higher the likelihood of knock-on effects on economic sentiment and global financing conditions.’

Pound (GBP) Flat as UK Housing Prices Rebound

Sterling saw little movement on Thursday morning as traders continued to focus on the future trading relationship between the UK and EU.

Prime Minister Boris Johnson took a hardline approach ahead of trade negotiations, making investors wary. His view that the UK did not have to follow the bloc’s rules weighed on the Pound.

However, this morning GBP received a slight upswing after data showed UK house prices rose by the most in three years.

January’s data added to signs that the economy has begun to rebound following December’s general election.

The Royal Institution of Chartered Surveyors’ (RICS) housing price index jumped from -2 in December to 17 in January.

This could mean the Bank of England (BoE) are unlikely to cut rates in the near-term, as policymakers were looking for signs of a pick-up before making any changes to monetary policy.

The data also suggests that consumer sentiment has increased as the election lifted some of the ongoing Brexit uncertainty.

Commenting on the data, RICS chief economist, Simon Rubinsohn noted:

‘It remains to be seen how long this newfound market momentum is sustained for, and political uncertainty may resurface towards the end of the year. But at this point in time contributors are optimistic.’

Pound Euro Outlook: Eurozone Growth Data in Focus

Looking ahead to Friday, the Euro (EUR) could slide against the Pound (GBP) following German growth data.

If the German economy does not expand as much as expected in the final three months of 2019, the single currency will fall.

Meanwhile, further growth data could send EUR lower at the end of this week’s session.

If the Eurozone’s Q4 GDP slumps, the Pound Euro (GBP/EUR) exchange rate will edge higher.

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