GBP/EUR Exchange Rate Outlook – Optimism as Brexit Negotiations Progress
After a week of tense negotiations, demand for Pound Sterling (GBP) exchange rates picked up modestly in response to the news that Brexit negotiations have been cleared to progress to their second phase.
But while this means that the UK and EU can begin discussing the shape of their future trade relationship, a significant degree of uncertainty still remains.
Comments from chief EU negotiator Michel Barnier soon saw GBP exchange rates return to a weaker footing, as the official ruled out the possibility of special treatment for London’s financial sector.
Given the significant role that the City plays in the UK economy, this naturally rattled investors, prompting the Pound to slump once again.
Pound Sterling to US Dollar Update: GBP/USD Exchange Rate Fluctuates as Trump Set to Sign in Tax Reforms
After being boosted by positive UK data on Monday, the GBP/USD exchange rate was undermined by a slightly disappointing showing from the CBI reported retail sales figure for December, with the index slipping from 26 to 20 as Christmas shopping failed to keep pace with the activity surrounding the Black Friday sales.
However, as this dip was in line with forecasts the negative impact of the data was limited, preventing fresh GBP exchange rate losses.
The GBP/USD exchange rate was little changed by the news that Trump’s tax reforms are on the verge of being signed into law, with some economists questioning how much impact the reforms will actually have on the US economy.
Heading into the second half of the week, the GfK consumer confidence index may help keep a floor under Sterling if it holds steady at -12 in December.
Focus will also fall on the latest public sector net borrowing figure, with new government debt forecast to have mounted further in November.
USD/GBP Exchange Rate Today – US Dollar Fails to Capitalise on Tax News
The impact of the Federal Reserve’s widely anticipated decision to raise interest rates in December quickly started to fade, leaving the US Dollar somewhat lacking in support.
Markets also failed to take particular heart from the progress of the Trump administration’s long-promised tax reform bill, with the impact of the measures already largely priced in.
As a result, the ‘Greenback’ is struggling to find much traction against its rivals, even though the latest US housing market data bettered expectations.
With the Fed looking likely to pursue a less aggressive pace of monetary tightening over the coming year than hoped for, the upside potential of the US Dollar appears limited.
Even so, a strong rebound in November’s durable goods orders data may offer USD exchange rates a degree of support ahead of the weekend.
EUR/USD Currency News – Weak Inflationary Pressures Limit Odds of ECB Tightening, Undermine Euro Exchange Rates
The Euro to US Dollar (EUR/USD) exchange rate has been struggling to extend gains amid signs that the European Central Bank (ECB) is likely to maintain its neutral to dovish policy bias for some time to come.
Even though the central bank raised its growth forecasts at its December meeting, policymakers maintain a more cautious view on the domestic inflationary outlook, limiting the odds of any future monetary tightening.
Weaker-than-expected German producer price index data added to this impression, putting further pressure on EUR exchange rates.
However, an improvement in the latest Eurozone and German GfK consumer confidence indexes could offer greater support to the Euro ahead of the festive period.
So long as consumers maintained a generally upbeat mood, this should give investors greater cause for confidence in the Eurozone’s economic outlook, even if inflation continues to trail expectations.