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GBP/EUR Limited by Brexit Anxieties as ECB Slashes Growth Forecast

Last week’s high: €1.1700

Last week’s low: €1.1571

 

Euro Weakened as ECB Slashes Growth Forecast

The Pound Euro exchange rate fell last week as concerns over the Irish backstop heated up between the UK and the EU as the Brexit deadline ticked ever closer.

Brexit tended to dominate the week, and improvements in economic data such as the UK Markit Services PMI for January, which was published on Tuesday, left the Pound unmoved as pessimism over May’s Brexit deal haunted markets.

The Pound failed to make any headway on the Euro despite the European Central Bank slashing its growth forecast on Thursday. This saw the Euro fall against most of its competitors as the Eurozone’s slowing weighed heavily on the single currency.

The second half of the week saw the Pound weaken further, as news on the Irish backstop was failing to emerge, with May looking increasingly desperate to gain backing for her Brexit deal ahead of the 12 March parliamentary vote.

The pairing closed the week with the Pound down against the Euro following May’s urgent plea to back her deal, which indicated an decreasing likelihood that we would see any successful Brexit conclusion on the ‘meaningful vote’ on Tuesday.

 

EUR Outlook: Inflation Data in the Frame

Looking ahead, tomorrow’s parliamentary vote on Theresa May’s Brexit deal is to be the highlight, and determining factor of the week.

The Pound could see some heavy volatility if May’s Brexit deal is rejected, and this will be particularly likely if the UK and the EU fail to draw up a consensus on the Irish backstop.

Meanwhile, Euro traders will be looking ahead to the publication of Germany’s Harmonised Index of Consumer Prices for February on Thursday, and with any signs inflation holding up, this could see the Euro rise further against the Pound.

 

Key Events

11th March

07:00 German Industrial Production (Jan)

07:00 German Trade Balance (Jan)

13:00 BoE’s Haskel speech

12th March

09:30 UK Manufacturing Production (Jan)

09:30 UK Industrial Production (Jan)

N/A UK Parliamentary Vote on Brexit

13th March

10:00 Eurozone Industrial Production (Jan)

14th March

07:00 German Harmonized Index of Consumer Prices (Feb)

15th March

10:00 Eurozone Consumer Price Index (Feb)

 

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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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