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GBP/EUR Declines on Growing Political Uncertainty despite Positive UK Data

Last week’s high: €1.1799

Last week’s low:  €1.1566

 

Pound Decline Hastened by Political Impasse over Brexit

Sterling fell back against the Euro over the course of last week as traders became wary of the UK currency in light of accelerating political uncertainty. Not only has there been no progress in cross-party talks on Brexit, but Theresa May is being pressured to step down by a growing number of backbenchers as the scale of the Conservative Party’s losses under her leadership becomes clearer.

Nevertheless, the Pound was offered some support on Friday when a strong first quarter GDP print was revealed, although even this was unable to bolster Sterling much as analysts warned the pick-up in growth was likely to fade in the second quarter and had only been caused by Brexit stockpiling.

A speech by ECB President Mario Draghi in the mid-week was perceived by markets as supportive of the Euro as he sidestepped the issue of persistently low Eurozone inflation, saying that markets should instead focus more on wage growth.

 

EUR Outlook: Will Steady Eurozone GDP prop up the Euro this week?

Tuesday’s Eurozone growth figures will be in focus for traders this week, with an expected steady reading likely to allay fears that the bloc is continuing to head on a downward trajectory.

In the absence of any fresh Brexit developments, we may see the Pound garner support throughout the first half of the session if the latest UK labour figures reveal that the recent uptrend in wage growth has persisted into March.

Thursday will see a meeting of the influential Eurogroup, with finance ministers set to debate the bloc’s economic and monetary issues – as ever, if Brexit is discussed it could cause volatility in the GBP/EUR exchange rate.

 

Key Events

14th May

07:00 EU Germany Harmonised Index of Consumer Prices (Apr)

09:30 UK Unemployment Rate (Mar)

09:30 UK Wage Growth (Mar)

10:00 EU Eurozone Industrial Production (May)

10:00 EU Germany ZEW Economic Sentiment Survey (May)

15th May

07:00 EU Germany GDP (Q1)

10:00 EU Eurozone GDP (Q1)

16th May

All Day EU Eurogroup Meeting

17th May

10:00 EU Eurozone CPI (Apr)

 

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To keep up to date with the Euro, visit the Euro blog in our Currency News section.

 

 

Alastair Archbold

Foreign Exchange Manager

aja@fcgworld.co.uk

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