Publication of Brexit Assessment Papers Pressures GBP/EUR
The Pound Euro (GBP/EUR) exchange rate is trading in a wide range this morning as investors reacted to leaked government papers looking at the impact of Brexit on the UK economy.
At the time of writing the GBP/EUR exchange rate is currently down around 0.2%, extending the pairing’s weekly losses to roughly half a cent.
Pound (GBP) Under Fire after Leaked Paper on Brexit
Sterling sentiment is tumbling this morning in the wake of reports that leaked government documents paint a damning image of the UK economy outside the EU.
Documents titled ‘EU Exit Analysis’ and obtained by Buzzfeed suggest that the UK economy will be worse off outside of the EU, no matter what deal is struck by the government.
Looking at the first 15 years after Brexit, the paper suggests that the UK’s economic growth could be up to 8% lower outside of the EU.
On top of this it also reports that nearly all sectors of the UK economy will be hit by Brexit and that no region in the UK would escape unscathed.
Alex Spence, senior political correspondent at BuzzFeed News said;
‘It suggests every sector of the economy is going to be hit and every UK region will be worse off.’
The government attempted to limit the fallout by stressing that the paper did not include the possibility of the government’s preferred deal of a ‘bespoke’ trade deal, however given the apparent reluctance of the EU to agree to such a deal it failed to lift GBP/EUR.
The leak is also yet another embarrassment for Theresa May and is likely to further undermine her authority within her own party, something that is unlikely to foster confidence in the UK’s political landscape and the Pound as a whole.
Euro (EUR) Bolstered by Upbeat GDP Figures
At the same time the Euro is pushing higher this morning on the back of the release of the Eurozone’s latest GDP figures.
According to data published by Eurostat, the preliminary reading revealed that the bloc’s economy expanded at 0.6% in the fourth quarter, while the previous quarter’s growth was revised up by 0.7%.
Most importantly however was that annualised growth revealed that the Eurozone enjoyed its fastest pace of growth in a decade last year as year-on-year growth struck 2.7%.
GBP/EUR Forecast: Robust German Inflation to Bolster the Euro?
Looking ahead the GBP/EUR exchange rate may continue to slump this afternoon with the release of Germany’s latest CPI figures, with economists forecasting that domestic inflation will hold at 1.7% in January.
Meanwhile the Pound may slump in overnight trade following the publication of the UK’s latest consumer confidence index as analysts predict it will have held at a four-year low of -13 at the start of the year.