GBP/EUR Exchange Rate Slips as Concerns Rise over May Failing to Drop No-Deal
The Pound (GBP) fell against the Euro (EUR) after investors absorbed the disappointing UK economic data today.
Frances O’Grady, the General Secretary of the Trade Union Congress, commented:
‘The prime minister’s failure to rule out a no-deal Brexit is harming confidence in the economy and holding back growth.’
Furthermore, concerns are beginning to increase over Prime Minister Theresa May’s rejection of the customs union, which could potentially heighten the possibility of a no-deal between the UK and the EU.
GBP/EUR Exchange Rate Steady as Manufacturing Falls for Sixth Consecutive Month
The Pound Euro (GBP/EUR) exchange rate is down very slightly today and is currently trading around €1.1429 on the inter-bank market.
Sterling (GBP) struggled against the Euro (EUR) following the publication of the UK Q4 GDP figures, which fell to 0.2%.
Samuel Tombs, a Chief Economist at Pantheon Macroeconomics, said there was little to worry about, tweeting:
December GDP data look awful, but the drop was driven by the construction and retail sectors, which are always volatile. Keep calm and carry on expecting slow growth, not a recession. pic.twitter.com/Y2yNZg8NnG
— Samuel Tombs (@samueltombs) February 11, 2019
These were also followed by poor UK manufacturing production figures for December, which slipped by a worse-than-expected -0.7% – the sixth consecutive monthly fall.
Pound Euro (GBP/EUR) Under Pressure as UK Industrial Production Slumps
Today also saw the release of the UK industrial production figures for December, which fell below expectation.
These figures have further weakened confidence in the Pound (GBP), with the UK economy showing increasingly worrying signs of struggling.
Meanwhile, the Euro (EUR) was left unmoved by the publication of Ireland’s construction PMI figures for January, which eased to 54.6.
Simon Barry, a chief economist at Ulster Bank, commented:
‘[This] indicates that firms continue to report solid gains in activity. Housing was the fastest-growing category in January, with this important sub-sector recording ongoing solid expansion, albeit at a somewhat less rapid pace than earlier in the recovery.’
These were followed by the Danish inflation rate figures for January, which increased above expectation to 1.3%, although the Danish Krone (DKK) is separate from the single currency.
Most EUR traders, however, will be keeping an eye on the Eurogroup meeting today, and with any dovish comments about the state of the Eurozone economy we could see the Euro weaken against Sterling.
Pound Euro (GBP/EUR) Exchange Rate: Labour Party Support Sends ‘Powerful Signal’ to EU
In Brexit news, UK Prime Minister Theresa May has agreed to engage in discussions with the Labour leader Jeremy Corbyn, after she responded to his letter on Sunday.
Theresa May mentioned that the two should meet ‘as soon as possible’ to discuss alternative arrangements to the Northern Irish backstop, which has caused tensions to mount both in Parliament and the EU – with just 50 days to go until the UK leaves the EU.
‘Labour’s support for this position going into the next phase will, I hope, send a powerful signal that the EU should reconsider its stance.’
Boris Johnson has also stepped forward today saying that he would back May’s deal if she secures a time limit in the Irish backstop, saying:
‘I think that some of the ideas that the Prime Minister has mentioned in the House of Commons do seem sensible… I would want to look very carefully at what is being proposed, and it would have to give the United Kingdom a UK-sized exit from the backstop.’
GBP/EUR Forecast: Pound could benefit from Brexit Extension
Pound (GBP) traders will be looking ahead to the speech by the Bank of England Governor, Mark Carney, tomorrow, and hoping that he continues in the same hawkish tone he took last week.
Most Pound investors, however, will be looking further ahead to Wednesday, which will see the printing of the UK yearly CPI figures for January.
These will also be followed by the publication of the UK RPI figures for January, which are expected to increase, potentially providing some uplift for the Pound.
Wednesday will also see the release of the Eurozone’s industrial production figures for December, which are expected to decrease, potentially weakening the EUR/GBP exchange rate.
The GBP/EUR exchange rate will likely be driven by Brexit factors this week, as Theresa May once again engages with renegotiations on the Brexit deal, and with any signs of a request for an extension granted, the Pound could benefit.