Pound Euro (GBP/EUR) Exchange Rate Muted as ECB Resignation Emphasises Deep Divisions within Bank
The Pound Sterling Euro (GBP/EUR) exchange rate remained muted and the pairing is currently trading around €1.1266.
On Thursday, the Euro hit a 28 month low following the shock resignation of the European Central Bank’s (ECB) Sabine Lautenschläger.
Timing her departure to match the outgoing President Mario Draghi, Lautenschläger did not reveal the reasons why.
Meanwhile, analysts have said she is unhappy with the bank’s increasingly loose monetary policy after it cut a key interest rate.
Incoming President Christine Lagarde is expected to maintain a similar approach to Draghi.
The departure of the senior ECB member underscores the deep divisions within the bank over how to steer the bloc through a period of growing external threats and slowing global growth.
Sterling (GBP) Flat as Court Ruling Creates Further Uncertainty
Following the Supreme Court’s ruling that Prime Minister Boris Johnson’s move to suspend parliament for five weeks was unlawful, Brexit uncertainty increased.
Following the decision, the Pound edged up thanks to the belief the UK will avoid a no-deal Brexit at the end of October.
However, the current split in parliament created further uncertainty which weighed on GBP.
Meanwhile, Michel Barnier, EU Brexit negotiator said the UK had yet to provide ‘legal and operational’ proposals that could tackle the current Brexit impasse.
This dampened Sterling sentiment, leaving the currency pairing muted.
When he arrived for talks on the latest Brexit development, Barnier said to reporters:
‘We are still ready to work on any new legal and operational proposal from the EU.’
Euro (EUR) Muted as German Confidence Edges Higher
The single currency was left muted against the Pound despite data revealing German consumer confidence is set to improve in October.
GfK stated the European Central Bank’s (ECB) stimulus package will likely boost confidence from 9.7 to 9.9.
Chief Eurozone economist at Pantheon Macroeconomics, Claus Vistesen said this morning’s data was a ‘welcome rebound’.
However, Vistesen added:
‘In addition, the headline index is not a good indicator for neither retail sales nor consumers’ spending.
‘Consumers in Germany are now caught between the reality of a still-solid labour market overall, and a decent real wage growth, and a full-blow recession in manufacturing, which is now affecting labour market conditions in this key sector. Employment intake is slowing, marginal workers are being laid off, and work hours are being reduced all factors that should, in time, hit sentiment.’
Pound Euro Outlook: Will Disappointing UK Confidence Weigh on GBP?
Looking ahead to Friday, the Pound (GBP) is likely to extend its losses against the Euro (EUR).
If GfK reveals UK consumer confidence slumped further into contraction in September, Sterling is likely to slide.
However, the pairing is likely to be left muted if German import prices fall.
If August’s import prices slide further than forecast, the Pound Euro (GBP/EUR) exchange rate is likely to be left muted.