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UK Political Jitters Send GBP/EUR Sliding

Yesterday’s high: €1.1269

Yesterday’s low: €1.1203

German Wholesale Prices Stagnate

In another blow to hopes of the European Central Bank (ECB) returning to a hawkish bias, October’s German wholesale price index stagnated on the month.

This suggests that price pressures within the Eurozone’s powerhouse economy are not building as investors might have hoped, giving the ECB incentive to sit tight on monetary policy.

The Euro also came under pressure as the International Monetary Fund (IMF) warned that a no deal Brexit could see economic growth on both sides of the Channel diminished.

Nevertheless, the GBP/EUR exchange rate slumped sharply at the start of the week thanks to the latest political developments in Westminster.

News that 40 MPs are now ready to support a letter of no confidence in Theresa May suggests that the Prime Minister’s position is becoming increasingly fragile.

With the latest round of Brexit talks having failed to deliver any tangible signs of progress the prospect of fresh political upheaval weighed heavily on the Pound.

Markets were also discouraged by the contents of a leaked letter from Boris Johnson and Michael Gove to the Prime Minister, which urged a push for a harder form of Brexit.

Euro Outlook: Markets Look for Strong Eurozone Growth

This could be an eventful day for the Euro, with a number of high-impact data releases on the calendar.

Particular focus will fall on the third quarter Eurozone gross domestic product reports, with investors hoping to see the currency bloc maintaining strong growth.

So long as signs still point towards the Eurozone outpacing its rivals in terms of growth in 2017, the appeal of the Euro is likely to pick up.

Even so, comments from European Central Bank (ECB) President Mario Draghi remain a downside risk for EUR exchange rates.

Confidence in the Pound, meanwhile, could improve if October’s UK consumer price index shows a fresh uptick in inflationary pressure.

As this could encourage greater Bank of England (BoE) hawkishness, such a result would be well received by the GBP/EUR exchange rate.

Key Events

14th November

09:00 Italian Gross Domestic Product

09:30 UK Consumer Price Index

10:00 Eurozone Gross Domestic Product

10:00 ECB President Mario Draghi Speaks

 

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

Thomas Taylor

Currency Dealer

T: (0) 1442 892 074

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