Lack of Brexit Breakthrough Leaves Pound Euro (GBP/EUR) Exchange Rate on Back Foot
As the latest round of Brexit talks failed to yield a visible breakthrough over the weekend the Pound Sterling to Euro (GBP/EUR) exchange rate saw its earlier gains reversed.
Although there were signs of progress in the intensive discussions this was not enough to keep Pound Sterling (GBP) on its bullish run this morning.
With the two sides still at apparent odds over the issue of the Irish border, and the nature of Northern Ireland’s future customs arrangements, investors’ earlier sense of optimism faded.
Anticipation ahead of parliament’s return also put pressure on GBP exchange rates, with a sense of political anxiety continuing to hang over the Pound.
Euro (EUR) Potential Limited as German Inflation Remains Lacklustre
While September’s German wholesale price index recorded another sharp contraction on the year this failed to offer the GBP/EUR exchange rate any meaningful boost.
Even so, the mood towards the Euro (EUR) still soured in the wake of the data, with signs continuing to point towards a lacklustre level of inflationary pressure within the Eurozone’s powerhouse economy.
The appeal of the single currency could deteriorate further over the course of the morning if Eurozone industrial production figures also prove underwhelming.
As forecasts point towards production extending its bout of decline further, falling -2.5% on the year in August, worries over the strength of the Eurozone’s economic outlook are likely to pick up.
Unless the industrial sector can show signs of resilience in the face of ongoing global trade tensions and slowdown concerns support for the Euro looks set to decline.
Slowing UK Wage Growth Forecast to Add to GBP/EUR Exchange Rate Weakness
Demand for the Pound could falter further on Tuesday with the release of UK labour market and wage growth data.
August’s average earnings figures may put particular pressure on the GBP/EUR exchange rate, as forecasts suggest an easing in wage growth momentum.
If wage growth appears to be stalling the appeal of the Pound is likely to diminish, given the degree of pressure already facing UK consumers in the face of ongoing Brexit-based anxiety.
Any uptick in the unemployment rate could weigh heavily on GBP exchange rates as worries over the growing impact of Brexit uncertainty continue to drag on economic momentum.
Sliding German Economic Sentiment Set to Weigh on Euro
With the ZEW economic sentiment indexes expected to demonstrate a fresh slide in October EUR exchange rates look vulnerable to further selling pressure.
After an extended period of decline the headline German sentiment index is forecast to drop from -22.5 to -27.3.
Given existing worries over the possibility of an imminent German technical recession fresh signs of economic anxiety could weigh heavily on the Euro tomorrow.
A similar decline in the Eurozone economic sentiment index may also offer the GBP/EUR exchange rate a boost as slowing global trade continues to stifle economic growth.