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GBP/EUR Benefits from Decreased UK Political Jitters

Yesterday’s high: €1.1227

Yesterday’s low: €1.1135

Solid German Data Boosts Euro Outlook

The general mood towards the Euro improved in response to unexpectedly strong German industrial production figures on Monday.

Markets were impressed to find that production had strengthened 2.6% on the month in August, in comparison to the 0.9% uptick that had been forecast.

This suggests that the Eurozone’s powerhouse economy remains in a robust state of health, even as clarity over the shape of its next government is still a little lacking.

As the Catalan crisis did not escalate further at the start of the week, this also offered support to the single currency, in spite of the ongoing threat of a unilateral declaration of independence.

However, the GBP/EUR exchange rate managed to largely shrug off these Euro-positive developments to make some solid gains.

As the threat of an imminent leadership challenge to Theresa May appeared to recede somewhat over the weekend, this buoyed the appeal of the Pound.

While political jitters remain, a lack of fresh turmoil offered support to Sterling in the short term.

Euro Outlook: Catalan Independence Worries Remain

However, the GBP/EUR exchange rate could struggle to hold onto its gains today thanks to the latest raft of UK data.

Any weakness in the latest industrial production and trade balance figures could weigh heavily on the Pound, undermining confidence in the domestic outlook.

On the other hand, as forecasts point towards a modest uptick in output on the month and a narrowing of the trade deficit, this could offer GBP exchange rates further support.

The NIESR gross domestic product estimate for the three months to September will also be in focus, with investors hoping to see signs of a further uptick in domestic growth.

Altogether the GBP/EUR exchange rate looks set to see further volatility over the course of the day.

If Catalan officials do attempt to declare independence today then the Euro is likely to slump sharply, with the future of the Eurozone already looking rather less stable than markets would like.

Key Events

10th October

09:30 UK Industrial Production

09:30 UK Trade Balance

13:00 UK NIESR Gross Domestic Product Estimate

 

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Samuel Roberts

Currency Dealer

T: (0) 1442 892 077

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