- Euro Pound Opens Week at 0.88 – Pair has advanced from last week’s lows of 0.87
- Euro Little Changed Following Inflation Report – Eurozone inflation meets expectations
- EUR Forecast: Confidence Stats Ahead – Eurozone and German consumer confidence in focus
- GBP Forecast: Brexit Developments could Inspire Pound – As well as UK growth data on Friday
The Euro Pound exchange rate advanced last week, despite a lack of market reasons to buy the Euro, due to concerns about the timing of Brexit negotiations. With UK-EU trade talks unlikely to begin until March 2018, Sterling investors are highly anxious.
EUR GBP began last week at the level of 0.8793. The pair looked on track to see losses when it hit a low of 0.8763 on Thursday, but on Friday afternoon the pair surged to a high of 0.8851 and closed the week at 0.8820.
Euro (EUR) Movement Little Changed Following Inflation Report
Last week’s Eurozone data was decent and helped to support the Euro, but the shared currency’s gains have been limited due to expectations that Eurozone inflation will remain subdued in the coming years.
The European Central Bank (ECB) has continued to forecast that Eurozone inflation would drop in 2018 and remain below its 2.0% targets until at least 2020.
This means the bank is unlikely to take a more hawkish stance on monetary policy any time soon, despite the strong performance of the Eurozone economy in 2017.
Monday’s Eurozone inflation report from November is unlikely to have changed the bank’s mind either, as the results met expectations in every key print.
Eurozone inflation remained at just 0.1% month on month, as forecast, while the yearly figure improved from 1.4% to 1.5% as expected.
The Eurozone’s yearly core inflation rate remained at 0.9% as predicted too, indicating the bloc’s underlying inflation trends had not changed much in November.
Overall, investors still have little reason to go bullish on the Euro, especially as it has already strengthened in recent months due to a strong economic outlook for the Eurozone.
Pound (GBP) Limp on Persistent Brexit Anxieties
Last week’s UK economic data was decent, but due to widespread uncertainties about the future of the Brexit process and upcoming Brexit negotiations, the Pound was unable to benefit.
The Bank of England (BoE) reflected this uncertainty too, noting that despite progress in Brexit talks they still remained the biggest economic uncertainty.
The bank forecast that UK interest rates would only rise gradually over the next few years, which disappointed Pound hawks last Thursday.
Since then, Brexit news has taken focus in Pound trade once again. Sterling was given a brief boost by news that the first phase of Brexit negotiations had finally concluded, but now investors are more anxious about the short period of time in which the second phase of talks must be completed.
As Britain is still set to leave the EU in March 2019, statements from officials that UK-EU trade talks will not begin until March 2018 have left investors anxious that presumably difficult trade talks will need to conclude in under a year.
This week has seen UK Prime Minister Theresa May looking to discuss with her fissured cabinet what kind of post-Brexit trade deal Britain should aim for.
Markets are anxious about whether the soft Brexit or hard Brexit backers of May’s cabinet will have more influence on talks.
On top of this, EU officials have issued further warnings about what kind of deals may be possible. According to EU chief negotiator Michel Barnier;
‘[The British] have to realise there won’t be any cherry picking. We won’t mix up the various scenarios to create a specific one and accommodate their wishes, mixing, for instance, the advantages of the Norwegian model, member of the single market, with the simple requirements of the Canadian one. No way. They have to face the consequences of their own decision.’
Euro Pound Forecast: Brexit News Remains in Focus
Despite the Eurozone’s influential inflation stats on Monday, EUR GBP exchange rate movement was largely influenced by Sterling on Monday.
Brexit news is likely to remain in focus for most of the week. Any signs on the kind of stances that UK or EU negotiators could take in upcoming trade talks will have an influence on Euro Pound movement.
While Sterling investors focus on Brexit, some notable Eurozone ecostats could inspire Euro movement in the coming days if they surprise traders.
Tuesday will see the publication of Ifo’s German business confidence results, as well as the Eurozone’s Q3 wage growth results.
Thursday will follow with Eurozone consumer confidence projections for December, followed by German and Italian consumer confidence stats on Friday.
UK data is unlikely to be too influential on Pound trade for most of the week, though Friday’s Q3 Gross Domestic Product (GDP) results could influence Sterling.
EUR GBP Interbank Rate
At the time of writing this article, the Euro Pound exchange rate trended in the region of 0.8840. The Pound to Euro exchange rate traded at around 1.1312.