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GBP/EUR Dragged Down by Brexit Issues

Last week’s high: €1.1461

Last week’s low: €1.1356

Pound Euro Turbulence Caused by Brexit Problems

The Pound made a mid-week advance against the Euro last week, but failed to maintain this lead and closed trading on Friday near the week’s opening exchange rate.

Brexit-related issues repeatedly panicked GBP traders and caused Pound Sterling losses – among the alarming news was a potential revolt from the Democratic Unionist Party (DUP).

DUP MPs threatened to vote down the government’s budget if Northern Ireland were kept in the EU customs union after Brexit, which caused initial Pound losses.

Downing Street later rejected indefinite membership of the customs union, but whether this satisfied the DUP or angered EU negotiators was unclear.

Euro traders were mostly focused on Italy last week – the Italian government continued to butt heads with the European Commission over budgetary spending.

Neither side made clear headway in resolving the dispute, which had a limiting factor on EUR/GBP exchange rate gains.

Euro Outlook: GBP/EUR Volatility ahead on UK Earnings Stats

This week’s first major data will come from the UK, covering reported changes to jobless benefit claimants, the unemployment rate and the pace of wage growth.

The outlook isn’t good for the GBP/EUR exchange rate, as slowing wage growth is forecast alongside a rise in the number of jobless claims.

The unemployment rate, which at 4% is at the lowest level since 1975, isn’t anticipated to change so might not provide much support to Pound Sterling.

What may be a bad start on UK jobs market data could go to additional GBP/EUR exchange rate losses on UK inflation figures.

These are set to show slower monthly and annual inflation during September, which could weaken the Pound because this would lower the odds of a 2019 Bank of England (BoE) interest rate hike.

The potential redemption for Pound Sterling will be late-week retail sales figures and a speech from BoE Governor Mark Carney.

Retail sales growth and Mr Carney’s backing of a near-term BoE interest rate hike could be enough to spark GBP/EUR exchange rate gains, in the event of any prior losses.

For Euro traders, the main news will be ZEW measurements of economic confidence and later inflation rate figures.

Falling ZEW readings could drain Euro trader confidence, although the single currency might advance if higher inflation is confirmed in September.

 

Key Events

16th October

09:30 UK Jobless Claims

09:30 UK Unemployment Rate

09:30 UK Average Earnings

10:00 EU ZEW Economic Sentiment Index

17th October

09:30 UK Inflation Rate

10:00 EU Inflation Rate

18th October

09:30 UK Retail Sales

16:30 UK Bank of England (BoE) Governor Mark Carney Speech

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

 

Thomas Taylor

Currency Trader

tnt@fcgworld.co.uk    

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