GBP/EUR Exchange Rate Sinks on Euro Strength
(Updated 17:00, 09/02.2022) The Pound Euro (GBP/EUR) exchange rate tumbled this afternoon as Euro (EUR) sentiment climbed on upbeat comments from the European Central Bank (ECB). Meanwhile, the Pound came under increasing pressure as further evidence emerged of Boris Johnson engaging in a Christmas quiz with colleagues.
Euro investors are pinning their hopes on a 2022 interest rate hike as policymakers indicate that imminent tightening measures may be necessary. The ECB’s Isabel Schnabel commented during a Twitter Q&A today:
‘Raising rates would not lower energy prices. But if high current inflation threatens to lead to a de-anchoring of inflation expectations, we may still need to respond, as our mandate is to preserve price stability.’
Also lending EUR support, the US Dollar came under increased selling pressure ahead of tomorrow’s inflation release.
In the UK, Boris Johnson is facing ever more criticism as a photograph is released of the Prime Minister with tinsel-bedecked colleagues at Number 10, an open bottle of Prosecco beside him. At the time the photo was taken, London was under tier 2 restrictions, which banned social mixing between households.
Labour MP Fabian Hamilton remarked, ‘It looks a lot like one of the Christmas parties he told us never happened.’
Original article:
Pound Euro Exchange Rate Inches Up as German Trade Surplus Tumbles
The Pound Euro (GBP/EUR) exchange rate is trading in a narrow range this morning following the publication of Germany’s December trade balance. The country’s trade surplus fell to €7bn from €12bn in January, exerting Euro (EUR) downside.
At the time of writing, GBP/EUR is trading at €1.1881, up 0.2% from today’s opening levels.
Euro (EUR) Slumps on German Trade Data
The Euro is sliding against its peers this morning as investors digest Germany’s lower-than-expected trade balance. December’s release marks the fifth consecutive yearly decline, as exports rose 14% to €1,376 billion while imports advanced at a faster 17.1% to €1,202 billion.
Germany has run regular trade surpluses since 1952, primarily due to strong exports of vehicles and other machinery. However, import growth exceeded export growth in the past year as exports to China fell by 8.9%.
Exports to the UK also tumbled – by 2.6% – alongside German imports from the UK. Analysts have blamed this shift on Brexit, as the movement of UK goods to Germany fell by 8.5% in the first year since the Brexit free trade deal was agreed in December 2020.
According to Carsten Brzeski of ING bank, today’s trade data shows that Brexit has left its mark on German trade:
‘2021 clearly marks a structural shift, illustrating current themes including reshoring, slowing of Chinese growth and different ways to deal with the pandemic.
Brexit has left its mark on German trade as the UK dropped out of the five most important trading partners list, with German companies exporting more to Austria than to the UK.’
Pound (GBP) Posts Meagre Gains on Lack of UK Economic Data
The Pound (GBP) is trading in a narrow range this morning as a lack of UK data exposes the currency to losses.
A reasonably upbeat market mood lends some support to Sterling, alongside easing concerns over a military conflict between Russia and Ukraine: French President Emmanuel Macron has apparently received personal assurance from Vladimir Putin that Russia will not worsen the crisis over Ukraine.
Capping GBP gains are ongoing political concerns regarding both Brexit and the UK government. While experts warn that the UK is losing its competitiveness, with border checks suppressing UK-EU trade, UK Prime Minister Boris Johnson continues to face calls to resign. The latest occurrence to taint Johnson’s reputation is his smear of Labour leader Keir Starmer.
Billionaire Tory Donor John Armitage has also weighed in on the issue, saying the Prime Minister has ‘gone past the point of no return’.
Armitage told the BBC ‘I find the lack of honour inherent in modern politics incredibly distressing… Politicians should go into politics to do good for their country: that is the overwhelming reason to be in politics. I don’t think it’s about your own personal sense of getting to the top of a snakes-and-ladders game.’
GBP/EUR Exchange Rate Forecast: Central Bank Guidance to Influence Trading?
Looking ahead, both European Central Bank (ECB) and Bank of England (BoE) Governor Andrew Bailey are due to speak tomorrow, potentially influencing the Pound Euro exchange rate.
Recently, suggestions that markets were premature to price in a 2022 ECB rate hike weighed upon the single currency; if tomorrow’s speakers reiterate this sentiment, the Euro may come under pressure.
Meanwhile, Governor Bailey could address the BoE’s recent interest rate hike – specifically the four MPC committee members who considered a 50bps hike appropriate. If Bailey strikes a hawkish tone, GBP could enjoy further gains.