Pound Euro Exchange Rate Stalls as Brexit Debate Resumes Following Return of UK Parliament

GBP/EUR Exchange Rate Muted as Parliament Reconvenes

The Pound to Euro (GBP/EUR) exchange rate is mostly rangebound this morning as UK politics return to the fore as MPs return to Westminster following the Christmas recess.

At the time of writing the GBP/EUR exchange rate is trading at around €1.1761, virtually unchanged from today’s opening levels.

Pound (GBP) Subdued as Brexit Back in Focus

The Pound (GBP) is struggling to find momentum this morning as GBP investors turn their attention back to UK politics with the reconvening of Parliament.

MPs will resume scrutiny of Boris Johnson’s EU Withdrawal bill as they return to Westminster today, with the bill scheduled for three days of debate.

With Johnson having secured an 80 seat majority in last month’s general election the bill is expected to easily make it through the House of Commons before moving to the Lords and likely being ratified by the end of the week.

While GBP investors will welcome the passing of the bill and the short-term clarity it offers, they will remain aware that the UK risks a no-deal Brexit at the end of 2020 unless Johnson is able to secure a trade agreement with the EU before the end of the year, something which is likely to hang over Sterling for the foreseeable future.

Upbeat Eurozone Data Fails to Inspire the Euro (ECB)

At the same time, the Euro (EUR) is trading in a narrow range this morning, in spite of the release of some positive Eurozone economic data.

Drawing the most attention was the Eurozone consumer price index, with the European statistics agency, Eurostat reporting headline inflation in the bloc jumped from 1% to 1.3% in December, its highest levels since June.

The uptick in inflation was driven mainly by food prices, which rose by 2% in the build up to Christmas.

However, when food and other volatile items are striped out, core inflation was shown to have remained unchanged last month, limiting the upside in the Euro.

Accompanying the CPI release were the Eurozone’s latest retail sales figures.

While sales growth beat expectations in November, with Eurostat reporting retail sales rebounded from -0.3% to 1%, against forecasts of a 0.6% rise, the figures were largely shrugged off by EUR investors.

GBP/EUR Exchange Rate Forecast: Rebound in German Factory Orders to Support the Euro?

Looking ahead, the Pound to Euro (GBP/EUR) exchange rate may face some pressure first thing tomorrow morning with the publication of Germany’s latest factory order figures.

Economists forecast order growth will have rebounded from -0.4% to 0.3% in November, bolstering optimism that Germany’s economy will have returned to growth at the end of 2019.

Also potentially bolstering the appeal of the single currency will be the release of the Eurozone’s latest business confidence figures, amidst predictions of a modest improvement in economic sentiment in December.

For GBP investors the focus will remain on Brexit on Wednesday as Boris Johnson meets with European Commission President Ursula von der Leyen, where they are expected to discuss the next steps in the Brexit process.

Matthew Andrews

Contact Matthew Andrews