GBP/EUR Exchange Rate Muted Ahead of Brexit Talks
The Pound Sterling to Euro (GBP/EUR) exchange rate is drifting lower this morning as Theresa May prepares for a trip to Brussels where she is expected to discuss possible changes to the Irish backstop with the EU.
At the time of writing the GBP/EUR exchange rate has slipped roughly 0.3% this morning, leaving the pairing slightly below the two-week high struck late on Tuesday.
Pound Sterling (GBP) Stalls as May Prepares for Brussels Trip
The Pound (GBP) appears to be in a holding pattern this morning as investors brace ahead of Theresa May’s meeting with European Commission President Jean-Claude Juncker later in the session.
This comes after Sterling rocketed higher on Tuesday on suggestions that the UK would put forth new legal proposals in effort to solve the contentious issue of the Irish backstop, with some analysts suggesting that the EU may be finally willing to bend on the issue.
Joseph Capurso, Senior Currency Strategist at the Commonwealth Bank said:
‘[According to news reports], UK and European officials are working on new legal text for the contentious Irish border backstop.
‘One official said a meeting between May and Juncker on Wednesday will be ‘significant’. According to this official, an agreed draft could be ready by Thursday. Juncker says he is not expecting major developments.’
Euro (EUR) Exchange Rates Buoyed as German PPI Impresses
At the same time, helping the Euro (EUR) to gain ground this morning was the release of Germany’s latest Producer Price Index (PPI).
According to data published by Germany’s Federal Statistical Office, Destatis, producer prices rose sharply in January, with price growth jumping from -0.4% to 0.4%, beating forecasts of another 0.2% contraction.
This resulted in annual growth accelerating 2.6%, outpacing forecasts that it would slow to 2.2% and propelled the index back to a record high of 105.1.
The data came as quite a relief to EUR investors as it helped to ease concerns regarding an economic slowdown in Europe’s largest economy.
GBP/EUR Exchange Rate Forecast: Weak Eurozone Confidence to Drag on the Euro?
Coming up later in today’s session, the Pound Euro (GBP/EUR) exchange rate may strengthen later this afternoon, following the release of the Eurozone’s latest Consumer Confidence figures.
Economists forecast that while sentiment will have shown a modest improvement this month, the outlook from consumers is likely to remain mostly negative, potentially weakening the appeal of the Euro in the latter half of today’s session.
Meanwhile, while the main focus for GBP investors today is expected to be the May-Juncker Brexit talks taking place later this evening, the UK’s latest industrial orders figures may also impact the Pound in the meantime.
This may see Sterling soften later this morning if the Confederation of British Industry reports that order growth contracted again in February.