Upwardly Revised French GDP Dents Pound Euro (GBP/EUR) Exchange Rate
An upward revision to the third quarter’s French gross domestic product pushed the Pound to Euro (GBP/EUR) exchange rate lower ahead of the weekend.
As the growth rate was lifted from an initial estimate of 18.2% to 18.7% this encouraged investors to favour the Euro (EUR) over its rival.
The single currency also benefitted from a smaller-than-expected decline in the Eurozone economic sentiment index for November.
As sentiment only weakened to 87.6, rather than the 86.5 forecast, this helped to shore up EUR exchange rates across the board on Friday.
Although signs still point towards sentiment across the currency union diminishing throughout the fourth quarter, adding to the odds of an imminent growth contraction, the mood towards the Euro nevertheless improved.
Pound Looks Vulnerable to Weaker UK Mortgage Approvals Figure
Support for Pound Sterling (GBP), on the other hand, could weaken on Monday with the release of October’s set of UK mortgage approvals and borrowing figures.
With approvals looking set to show a softening on the month confidence in the outlook of the UK housing market could diminish, to the detriment of the GBP/EUR exchange rate.
As long as households and lenders both show signs of taking an increasing cautious view at the start of the fourth quarter this could leave the Pound vulnerable to additional selling pressure.
While UK-EU trade talks are set to proceed in the days ahead the persistent lack of any obvious resolution to key issues may also weigh on GBP exchange rates in the coming week.
Until the threat of a no-deal Brexit scenario diminishes significantly the Pound looks set to trend lower as worries over the health of the UK economy mount.
If the two sides appear no closer to reaching a deal before the December deadline, given Boris Johnson’s refusal to further extend the transition period, this may keep the Pound under an elevated degree of selling pressure.
Negative German Inflation Forecast to Weigh on EUR Exchange Rates
Further volatility appears in store for the Euro, meanwhile, with the release of November’s preliminary German inflation data.
With the headline consumer price index forecast to fall sharply back into negative territory on the month the mood towards the single currency may easily sour.
If the monthly inflation rate falls to -0.7% as feared this would give the European Central Bank (ECB) incentive to consider an even greater degree of monetary loosening.
While markets already largely expect to see the central bank expand its quantitative easing programme in December a weak inflation reading would give investors fresh incentive to sell out of the Euro.
On the other hand, an upside surprise from the inflation data could see the GBP/EUR exchange rate come under greater pressure at the start of the week.