- EUR GBP Pressured by Italian Political Crisis – Italian PM may resign if referendum is defeated.
- Pound Weakened by ‘Brexit’ Report – Warns about impact of leaving the single market.
- British Consumer Credit Report – Pound Rallies as figures improve in October.
- German CPI Data – EUR may gain if data impresses.
The EUR GBP exchange rate slipped this morning, losing much of the ground gained yesterday as investors begin to fear the consequences of the upcoming Italian Referendum.
Euro Pound (EUR GBP) Pressured by Referendum Uncertainty
The Euro (EUR) has slid over concerns that the Italian Constitutional Referendum on Sunday could result in a change of government. Prime Minister Matteo Renzi has vowed to resign if his reforms fail to pass.
This could allow for a Eurosceptic party like the Five Star Movement or Forza Italia to gain power, causing markets to fear the possibly of Italy following Britain in leaving the EU.
Meanwhile the ongoing concerns over Italy’s banking sector are also causing market jitters as Renzi’s resignation could spell doom for his bank bailout programme, according to a senior Italian banker in the Telegraph;
‘We think the banks will have to raise €40bn in fresh capital. This is going to need an ESM bail-out. The problems in the banks are becoming an excuse to put Italy under an EU programme. It won’t happen under Renzi because he won’t be there any longer after a ‘No’ vote.’
‘Brexit’ Report Drags on Pound (GBP)
The Pound suffered yesterday as a cross-party alliance of MP’s released a report compiled by the Centre for Economics and Business Research (CEBR) which warned against the effects of a ‘hard Brexit’.
The study showed that every major sector of the British economy would be negatively impacted if the UK lost access to the single market and criticised any plans to give certain sectors special trade deals with the EU due to the close links between sectors.
Pound Bolstered by Strong Consumer Credit Report
The Pound Euro (GBP EUR) exchange rate managed to rally this morning however as it was strengthened by a stronger than expected Consumer Credit report.
Data showed that credit surged from £1.48bn to £1.62bn in October, easily beating predictions that it would only see a modest rise to £1.50bn, causing the 12 month growth rate to reach 10.5% – its strongest since October 2005.
Sterling was bolstered further by the impressive rise in mortgage approvals as they increased from 63,594 to 67,518 over the same period, beating expectations that figures would only rise to around 65,000.
The growth will help to alleviate market fears that Britain’s vote to leave the EU was weighing on the UK economy.
EUR USD Exchange Rate Forecast: German CPI Figures Ahead
The EUR GBP exchange rate may be able to mount a recover later today with the release of Germany’s latest CPI report.
Markets currently forecast that German inflation will hold at 0.8% in November, however if it is able to continue its recent trend of gains and shows an unexpected rise then the Euro may rally.
However a notable decline could see the single currency slide further as it stokes fears that the Eurozone’s largest economy is slowing down after some disappointing German data last week.
The UK economy is unlikely to provide much more momentum for the Pound in either direction today with only a single low impact ecostat scheduled, but is likely to see movement tomorrow with the release of both the GfK Confidence Survey and the Bank of England’s Stability Report.
Current Interbank Exchange Rates
At the time of writing the EUR/GBP exchange rate was trending around 0.85 and the GBP/EUR exchange rate was trending around 1.17.
