The Euro (EUR) rallied against the Pound (GBP) today after the European Union and Japan reached a free trade deal.
Japan and the European Union today announced a broad agreement that lowers the barriers on almost all goods traded between the two nations – a deal which has since caused the Euro to rally against the Pound. The agreement will essentially pave the way for trade without tariff barriers and is said to be a response to the recent cancelation of the Trans-Pacific Partnership (TPP) by US President Donald Trump.
Upon signing the agreement, Donald Tusk, President of the European Council stated:
‘Although some are saying that the time of isolationism and disintegration is coming again, we are demonstrating that this is not the case,’ whilst adding that the deal was about more than just trade and was evidence of ‘the shared values that underpin our societies, by which I mean liberal democracy, human rights and the rule of law.’
Japan is the third-largest economy in the world and demand within Japan for milk and dairy based products is increasing. The markets recognise this, so the announcement of the deal on the eve of the G20 summit was enough to kick-start the Euro from its recent dove-induced slump.
Sterling (GBP) Shrugs off Trio of Negative Private Sector PMIs
One would imagine June’s recent spate of underwhelming private sector figures would hurt the already struggling Sterling, but the effects have been fairly minimal. Instead, the Pound spent a great deal of this morning fluctuating against the Euro, as the single currency was buffeted by the displeasure investors had with the dovish European Central Bank (ECB).
Yesterday’s UK services PMI completed a hat-trick of downticking UK data releases, but it wasn’t until the announcement of the EU – Japan free trade deal today that things shifted in favour of the single currency.
With no UK data releases today, markets await tomorrow’s run of announcements, particularly the figures on May’s manufacturing production, construction output and industrial production – all of which are predicted to demonstrate growth. May’s total trade deficit is due to reduce, however.
The G20 Summit Looms – Responses to North Korea could Affect GBP/EUR
The G20 summit begins tomorrow, and many investors have begun to question the possibility that some form of communique will be released regarding North Korea’s recent actions. North Korea’s new ‘successful’ intercontinental missile launch has prompted responses from many of the world’s powers – the most significant being the United States, whose President Donald Trump has expressed clear indication that the US will confront the North Korean threat.
The possibility of tensions escalating in the wake of the the G20 summit may inspire currency movement in the days ahead.
Euro Stronger after Positive German Manufacturing Data
Germany received some encouraging manufacturing data this morning with May’s manufacturing orders increasing 1%, a welcome improvement on April’s decline of -2.2% and an indication that there’s still solid demand for goods from Germany – the Eurozone’s biggest economy. Whilst the Euro did steady somewhat this morning as a result, it was the Japan – European Union deal that successfully tipped the scales in the Euro’s favour.
Current Interbank Exchange Rates
At the time of writing the Euro to Pound Sterling (EUR GBP) exchange rate is trading at 0.8805. Conversely the Pound Sterling to Euro (GBP EUR) exchange rate is trading at 1.1354