GBP EUR Exchange Rate Tumbles as Merkel Decries ?Weak? Euro

May 22, 2017 - Written by Toni Johnson

STORY LINK GBP EUR Exchange Rate Tumbles as Merkel Decries ?Weak? Euro

The Pound Euro (GBP EUR) exchange rate plummeted over half a cent in trade today following comments from German Chancellor Angela Merkel.

In a panel with a group of students at Kurt Tucholsky high school in Berlin today Merkel was discussing building a closer relationship with new French President Emmanuel Macron when she was asked about the trade imbalance between the two largest economies in the Eurozone.

In responding Merkel said;

‘The euro is too weak -- that’s because of ECB policy -- and so German products are cheap in relative terms, so they’re sold more.’

Merkel also partly blamed the Germany’s trade surplus on lower oil prices which lowered the import costs of Germany. Adding that if fuel costs were around 50% high ‘then we’d soon have a lot more imports’.

The comments sent the Euro soaring as markets hope that a set of proposals laid out by German and French finance officials will help to balance trade in the Eurozone and make each country’s economy more competitive.

Meanwhile the Pound was weakened today by the latest polling data which suggested that Labour was rapidly catching up to the Conservatives.

Sunday’s YouGov poll placed Jeremy Corbyn’s party just 9 points behind the Tories, doing much to erase the 24 point lead that Theresa May enjoyed at the start of the election, following an outcry against a social care proposal that her opposition labelled a ‘dementia tax’.

This cast considerable uncertainty over the Brexit process as May’s expected parliamentary majority disappeared overnight.

This was compounded further by threats by the UK government to walk away from Brexit talks should it find negotiation terms to be unfavourable.

Of particular concern to UK officials is the ‘divorce’ bill that will be imposed on Britain by the EU to ensure that it meets its previous obligations to the group.

The size of the bill has led to great debate over recent weeks, with some analysts suggesting that the payment could be anywhere between €50bn and €100bn and is the main source of contention between the two sides.

Brexit Secretary David Davis said in an interview with the Sunday Times;

‘We don’t need to just look like we can walk away, we need to be able to walk away, under the circumstances, if that was necessary, we would be in a position to do it.’

Looking ahead the GBP EUR exchange rate is likely to retreat again on Tuesday as the UK Government releases the latest Public Sector Borrowing figures, with the public deficit expected to swell from -£4.36bn to -£8.15bn in April.

Meanwhile the Euro may cede some ground tomorrow as Germany’s latest Manufacturing PMI is expected to have slipped from 58.2 to 58.0 this month.

Current Interbank Exchange Rates

At the time of writing the GBP EUR exchange rate was trending around 1.1576 and the EUR GBP exchange rate was trending around 0.8638.

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