Pound to Euro Exchange Rate Dragged Lower by Brexit Fears, German Data
Following last week’s tumble, the Pound Sterling to Euro (GBP/EUR) exchange rate appeared to rebound from its lows yesterday. However, the Brexit speculation boosting Sterling (GBP) was limited, and on Tuesday the pair quickly tumbled again instead.
Last week saw GBP/EUR open at the level of 1.1765 and briefly touch a fresh 2019 high of 1.1775, before slumping around two cents and closing the week near the level of 1.1570.
Yesterday’s GBP/EUR rebound was short-lived due to some resilience in the Euro (EUR), and today the pair has fallen lower again. At the time of writing, GBP/EUR trended near a two month low of 1.1509.
Due to pressure for UK Prime Minister Theresa May to end cross-party Brexit talks and step down, the Pound slipped against most major currencies this morning. Meanwhile the Euro was supported by the latest German economic data.
Pound (GBP) Exchange Rates Slide Further as UK Prime Minister Told to Drop Brexit Talks
Last week saw the Pound plunging on expectations that cross-party Brexit talks would fail, leading to months more uncertainty in the Brexit process and UK politics overall.
Yesterday’s brief boost in support for Sterling was due to increasing pressure in the opposition Labour Party for the leadership to make a second referendum part of negotiations.
However, these hopes were short-lived and the Pound was sliding again this morning.
UK Prime Minister Theresa May is facing fresh pressure today from her own Conservative Party to abandon the cross-party talks.
MPs from her party wrote to May asking her not to agree to a post-Brexit customs union, which is something the Labour Party wants in negotiations.
May is also seeing rising pressure to announce the date she will resign as PM and make way for a new leader to handle the next steps of Brexit. These factors are all deepening market uncertainty and keeping the Pound unappealing.
Euro (EUR) Exchange Rates Find Support in German Wholesale Prices Report
The Euro was one of yesterday’s more resilient major currencies versus the Pound. This was due largely to weakness in the US Dollar (USD), which shared a negative correlation with the Euro.
Investors sold the US Dollar as China announced retaliation in the ongoing US-China trade war, worsening concerns about how the US economy may be impacted. This left the Euro stronger.
Then, the Euro found more solid support this morning as Germany’s latest data was solid and bolstered market hopes that the Eurozone’s biggest economy was more resilient than feared among the global growth slowdown.
While German inflation simply met projections and rose to a solid 2.0% year-on-year, Germany’s April wholesale prices beat forecasts in both prints.
The monthly print unexpectedly doubled from 0.3% to 0.6%, rather than edging higher to the expected 0.4%, while the yearly figure improved from 1.8% to an impressive 2.1%. These stats helped the Euro to hold gains this morning.
Pound to Euro (GBP/EUR) Exchange Rate Investors Anticipating German Growth Report
Following today’s solid German wholesale prices report, Euro investors are now even more hotly anticipating Germany’s Q1 Gross Domestic Product (GDP) growth rate projections.
The growth rate estimates will be published tomorrow morning and are expected to show improvements from a poor performance at the end of 2018.
If German growth was better in the first quarter of the year than analysts feared, the Pound to Euro (GBP/EUR) exchange rate could be in for even further losses.
Other key Eurozone data to keep an eye out for tomorrow includes French inflation rate data, Eurozone employment change and the bloc’s latest Q1 growth rate projections.
With Eurozone data most likely to drive Euro movement, the Pound to Euro (GBP/EUR) exchange rate could also be influenced by fresh developments in Brexit and UK politics.