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UK Economy’s ‘Loss of Momentum’ Leaves Pound Euro (GBP/EUR) Exchange Rate Flat

Euro Currency Forecast

Pound Sterling Euro (GBP/EUR) Exchange Rate Left Muted as UK GDP Disappoints

The Pound Sterling Euro (GBP/EUR) exchange rate remained muted on Tuesday, leaving the pairing trading at around €1.1884.

Sterling remained under pressure on Tuesday as the focus remained on Thursday’s election and further opinion polls.

YouGov is expected to release an update on their MRP poll tonight, which is going to be closely watched.

The Pound remained strong on Monday thanks to further opinion polls showing a Conservative lead, hitting a two-and-a-half-year high against the single currency.

Meanwhile, the Office for National Statistics (ONS) showed GDP data revealed the UK economy expanded by an annual rate of 0.7% in October.

According to the ONS, this was the weakest rate of expansion since March 2012 and the three-month average revealed UK growth stagnated.

Commenting on this morning’s data, PwC’s chief economist, John Hawksworth noted:

‘GDP was flat in both October alone and the three months to October, confirming a loss of momentum in the economy since the summer due to Brexit-related uncertainty and slower global growth.

‘Growth seems likely to remain subdued through the rest of 2019, but we would hope for a gradual revival in activity over the course of 2020 if current political and economic uncertainties ease. Our main scenario is for 1% GDP growth in 2020 assuming an orderly Brexit.’

Euro (EUR) Flat as German Sentiment Jumps to 22-Month High

The single currency was little changed on Tuesday as traders looked to the looming deadline for US tariffs, UK election, and this week’s central bank meetings.

Both the European Central Bank (ECB) and US Federal Reserve are expected to leave interest rates unchanged this week.

Meanwhile, data from Germany showed economic sentiment rose higher than expected, providing EUR with support.

The ZEW Economic Sentiment Index rose to a higher-than-forecast 10.7 in December compared to last month’s -2.1.

This was the first month the index has edged out of contraction since April and the highest since February 2018.

Pound Euro Outlook: Will Weak German Inflation Weigh on EUR?

Looking ahead, the focus will shift to Thursday’s UK general election which could cause the Pound (GBP) to edge higher against the Euro (EUR).

If polls continue to show the Conservatives remain ahead of Labour, Sterling sentiment is likely to rise.

Meanwhile, weak data from the bloc’s largest economy could leave the single currency under pressure on Thursday morning.

If German inflation slumps further than expected in November, the Pound Euro (GBP/EUR) exchange rate will rise.