GBP/EUR Exchange Rate Rises despite UK PM Theresa May Facing Confidence Vote This Evening
The Pound Sterling Euro (GBP/EUR) exchange rate is up today, and is currently trading at €1.1096, despite British Prime Minister facing a vote of no confidence from Conservative MPs this evening.
GBP gained some strength from the release of yesterday’s average earnings figures for October, which showed a better-than-expected increase, hitting a 10-year high.
At the same time unemployment figures for October showed a no-change at a 40-year low of 4.1%.
EUR, meanwhile, was weakened by the release of the Eurozone’s ZEW economic sentiment survey which showed a worse-than-expected decrease.
Yesterday also saw the single currency take a hit as the French President Emmanuel Macron capitulated to the recent gilets jaunes protestors by pledging to increase the minimum wage and reducing overtime tax; a move potentially leading to a budget deficit in contravention of EU rules.
Pound Sterling Euro (GBP/EUR) Exchange Rate Up as Theresa May Expected to Win Confidence Vote
The Pound (GBP) remained remarkably steady after today’s announcement that Theresa May faces a no confidence vote this evening, after the 1922 Committee of Conservative backbenchers received the required 48 letters.
Theresa May remained steadfast in her resolve to see of the challenge, commenting:
‘The new leader wouldn’t have time to renegotiate the withdrawal agreement and get the legislation through parliament by 29 March, so one of their first acts would have to be extending or rescinding article 50, delaying or even stopping Brexit when people want us to get on with it.’
GBP, however, has remained essentially rudderless with the degree of political uncertainty surrounding Brexit limiting Pound trade.
Politics aside, tomorrow will see the release of the UK’s RICS housing price balance for November, which is expected to remain static.
EUR/GBP Exchange Rate Down as EU Rattled by Political Tensions
The Euro responded positively to today’s release of October’s industrial production figures, which showed an increase at 0.2% against last month’s -0.6%.
However today’s slim data releases for the Eurozone has been considerably overshadowed by political news, leaving EUR traders cautious.
The EU is also facing increasing tensions over Italy’s budget, with talks due tomorrow between EC President Jean-Claude Juncker and Italy’s Prime Minister Giuseppe Conte, with EUR investors paying close attention to any signs of Rome lowering its budget deficit in accord with EC fiscal rules.
Peter Sorensen, a Chief Analyst at Danske Bank, commented that, in the light of France’s apparent intention to break those same fiscal rules:
‘It will be difficult for the EU to really go hard at Italy next year . . . Italy has been bought a few extra years.’
GBP/EUR Outlook: UK Confidence Vote in Focus
The GBP/EUR exchange rate is likely to remain focused on political developments in the coming week as any dramatic changes in the British government could throw Sterling into a state of volatility.
With Theresa May facing a possible vote of no confidence this evening from Conservative MPs, any change of leader could further delay Brexit.
Tomorrow will see a slew of Eurozone data releases, with the most important being the European Central Bank’s (ECB) rate decision which is expected to remain the same, although traders will be paying close attention to the accompanying forward guidance note.
This will also be followed by the ECB’s monetary policy statement and press conference, in which the President of the ECB, Mario Draghi, will be under close scrutiny by EUR investors for any hawkish comments.
Before that, we will see the release of Germany’s Consumer Price Index which is expected to remain static, which would offer little direction to the GBP/EUR exchange rate.