EUR/GBP Exchange Rate Heads Higher as Outlook for Eurozone Economy Remains Cautiously Optimistic
The Euro to Pound (EUR/GBP) exchange rate rose by 0.6% today, with the pairing currently trading around £0.909.
The Euro (EUR) rose against Sterling today ahead of this afternoon’s European Central Bank’s (ECB) interest rate decision, which is expected to hold at 0%.
Nonetheless, with the German economy – the largest in the Eurozone – showing encouraging signs of growth, EUR investors are hopeful that the ECB will take a more bullish approach in its policy going forward.
Today also saw reports that the German economy could reach pre-crisis levels in 2021 if the Covid-19 situation remains under control throughout the winter.
In French economic data, today saw the release of October’s Industrial Output, which beat forecasts and rose by 1.6%.
Maria Martinez, an analyst for Dow Jones Newswires, commented:
‘Compared to February – the last month before the coronavirus pandemic hit Europe – total industrial output was down 3.6% in October in calendar-adjusted terms.
‘Manufacturing output was up 0.5% in October compared with September, while energy production jumped 7.9% and construction rose 1.7%.’
As a result, the Euro has benefited against a weaker Pound today as the outlook for the Eurozone’s economy continues to steadily improve.
Pound (GBP) Falls as No-Deal Fears Rise as ‘Significant Uncertainty’ Surrounds January 1st
The Pound (GBP) fell today after the European Union (EU) released its no-deal Brexit contingency plans, sparking off concerns of Britain’s chaotic exit from the EU at the end of the year.
The EU said that ‘significant uncertainty’ remains around January 1st, when the UK is set to leave the EU with or without a deal.
As a result, UK markets are becoming increasingly jittery about the economy, which would be severely set back by leaving the EU without a trade agreement.
Meanwhile, UK Foreign Secretary Dominic Raab said that the EU needed to make a ‘substantial’ shift for Brexit talks to succeed, adding:
‘What we’re not going to be treated … is in a way that no other country would accept, and nor would the EU accept. It’s about some basic respect for democratic principles.’
In UK economic news, today saw the release of the final UK GDP data for October, which rose by 0.4%.
Dr Jonathan Gillham, the chief economist at PwC, said that the data already confirmed what they already know, that the economy was ‘slowing ahead of the second national lockdown in November’.
Mr Gillham also commented:
‘Overall, there is still a lack of confidence in the economy, with sectors such as accommodation and food the worst affected.’
EUR/GBP Outlook: Could Fears of a Chaotic Brexit Drag Sterling Down Deeper This Week?
Euro (EUR) traders will be awaiting tomorrow’s release of the latest German Harmonized Index of Consumer Prices for November.
Any indications that the German economy could be on the road to recovery would be EUR-positive.
However, Brexit developments will continue to determine the direction of the EUR/GBP exchange rate.
As a result, Sterling could fall considerably if it looks increasingly likely that Britain could be headed for a chaotic exit from the European Union.