EUR/GBP Exchange Rate Eases, But German Trade Data Surprises
The Euro Pound (EUR/GBP) exchange rate eased this morning to around £0.8956 even after July’s German trade balance figure exceeded forecasts, with the surplus widening to €20.2 billion.
Although this report modestly boosted optimism in the German economy, the single currency failed to rise against the Pound.
Carsten Brzeski, an Economist at the financial services company ING, also added a note of caution:
‘This morning’s [German] trade data brings a very weak ray of sunshine. Nothing more but luckily also nothing less.’
Meanwhile, political uncertainty continues to haunt European markets, with questions surrounding the longevity of a new Italian coalition formed of disparate parties with widely differing agendas.
Ferdinando Giugliano, an Analyst at Bloomberg, commented:
‘[T]he basis of the new coalition, including the program and the likely ministerial team, appear extremely shaky and give little hope for a stable and effective administration.’
GBP/EUR Exchange Rate Edges Higher as UK Growth Figure Beats Forecasts
The Pound climbed against the Euro following today’s July UK growth figure.
Output increased 0.3% in July on the month, a notable improvement on June’s stagnation.
The result buoyed confidence in the British economy and mildly reduced the likelihood of a Brexit-related recession.
However, Rob Kent, Deputy Director at the Office for National Statistics (ONS), stated:
‘GDP growth was flat in the latest three months, with falls in construction and manufacturing. While the largest part of the economy, services sector, returned to growth in the month of July, the underlying picture shows services growth weakening through 2019.’
July’s month-on-month manufacturing production figure also beat expectations today, climbing from -0.2% to 0.3%.
Brexit remains in focus today as UK markets anxiously await royal assent for the anti no-deal Brexit bill which passed through parliament last week.
If approved, the bill will require Prime Minister Boris Johnson to request a three month extension to the 31 October Brexit deadline. However, an extension is reliant on unanimous assent from EU leaders, with analysts already predicting division. Meanwhile, Johnson has refused to comply with the bill and his party continue to insist the October deadline will be honoured.
Nevertheless, we could see the Pound rise as fears for a no-deal Brexit ease.
EUR/GBP Could Weaken Further on Anti No-Deal Brexit Bill Success
The EUR/GBP exchange rate could extend losses if the UK anti no-deal bill gains royal assent as this will encourage confidence in a Brexit delay.
Sterling traders will also be looking forward to tomorrow’s UK ILO unemployment rate figure for July (which is expected to hold at 3.9%) and average earnings figures.
However, the Euro could fight back against the Pound if the French industrial output figure for July confirms consensus and rises from -2.3% to 0.5%.