EUR/GBP Exchange Rate Steady, UK Markets Brace for Brexit Bill to Pass-Through Parliament
The Euro Pound (EUR/GBP) exchange rate steadied today, with the pairing currently trading around £0.847 as UK markets brace for the passage of the EU Withdrawal Bill through Parliament as MPs return from the Christmas recess.
Sterling traders reacted positively, with the bill expected to pass due to the Prime Minister Boris Johnson’s substantial majority.
This follows reports that Boris Johnson would open talks with the President of the European Commission, Ursula von der Leyen, in a race against time to secure a free trade deal ahead of the 31st January Brexit leaving date.
However, Mikael Olai Milhøj, Senior Analyst at Danske Bank, recommended caution, commenting:
‘Some no-deal Brexit fears have been priced in earlier than we previously thought. We had thought it would take a while before Brexit would dominate the headlines again but PM Johnson’s renewed promise not to extend the transition period, which is set to end on 31 December 2020, means investors have become slightly more concerned about Brexit.’
The Pound (GBP) could begin to sink against the Euro (EUR) if Boris Johnson continues to maintain a hard-line stance on Brexit, as this could threaten a no-deal between the UK and the EU later on this year.
EUR/GBP Exchange Rate Steady Despite 9-month High Eurozone Inflation in December
The Euro (EUR) struggled to gain against the Pound this morning after the Eurozone’s preliminary inflation figure for December confirmed consensus and held at 1.3%, undercutting the European Central Bank’s target of 2%.
However, this could provide some cheer for the ECB as the bloc’s inflation shows signs of improvement and edges ever closer to the central bank’s targets.
Euro area #inflation up to 1.3% in December 2019: food +2.0%, services +1.8%, other goods +0.4%, energy +0.2% – flash estimate https://t.co/tQyfaOSw8S pic.twitter.com/Ofbu9r5M1N
— EU_Eurostat (@EU_Eurostat) January 7, 2020
Today also saw the release of the Eurozone’s retail sales figure for November, which beat forecasts and rose from 1.7% to 2.2%.
#Eurozone #CPI rises +1.3% MoM and YoY in December, as expected. Retail sales rises +1.0% MoM in Nov, more than exp. +0.6%. It seems the Eurozone economy is exit the stagnation phase. This should make the #ECB monetary policy stance more hawkish in 2020@graemewearden
— BP PRIME UK (@bpprimeuk) January 7, 2020
EUR/GBP Outlook: Could Sterling Sink on Returning No-Deal Brexit Fears?
Euro (EUR) investors will be looking ahead to tomorrow’s release of November’s German Factory Orders figure, with any signs of improvement last year providing a boost to the single currency as the bloc’s largest economy shows signs of growth.
Tomorrow will also see the release of December’s Eurozone business climate figure, which is expected to improve slightly from -0.23 to -0.16. However, this is unlikely to boost the Euro unless it beats forecasts and emerges out of contraction territory.
The EUR/GBP exchange rate will, however, continue to be driven by Brexit developments, with any signs of Boris Johnson cementing his hard-line position weakening Sterling as uncertainty over a UK-EU trade deal will haunt British markets.
