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Euro to Pound Exchange Rate Falls as US-China Tensions Have Potential to be Reignited

December 6, 2018 - Written by John Cameron

Today has seen global stock markets slump for a third day in a row, as there are fears fresh tensions between the US and China may emerge as the result of the arrest of tech giant Huawei’s chief financial officer, Meng Wanzhou in Vancouver, where she is facing extradition to the USA.

Better-than-expected German factory order figures were released early this morning showing orders rose from 0.1% to 0.3% between September and October, although this did little to help the Euro against the Pound.

The annualised factory data release showed that - compared to last October - this figure has contracted from -2.6% to -2.7%, the figure from the previous month had also been revised showing that the drop was worse than expected.

Greek unemployment figures for September were also released this morning, showing that there was a drop in unemployment from 18.9% to 18.6%, although this did not aid the Euro against the Pound, as the pairing continued to slump.

Euro (EUR) Exchange Rates Volatile Yesterday despite Strong Eurozone PMIs

The Eurozone saw the release of a slew of strong data on Wednesday, mainly in the form of PMIs.

Germany’s Markit services PMI remained steady at 53.3, whereas the composite PMI rose to 52.3 from 52.2, which was better than expected.

Eurozone retail figures also showed growth in October compared to September, jumping to 0.3% from -0.5%, although the figure grew compared to last year where it sat at 0.3%, the figure 1.7% was lower than forecast and the EUR/GBP exchange rate slid.

Pound (GBP) Exchange Rates Weighed Early in This Week’s Session as Carney Comments Drag on GBP

There was a lower-than-expected UK Markit services PMI in November, printing at 50.4 despite the forecast suggesting this would increase from the previous figure of 52.2.

This did little to stop the UK currency from rising against the Euro.

The Governor of the Bank of England, Mark Carney, issued a Brexit warning that dampened sentiment for the Pound, stating that in ‘the most extreme scenario, on average your shopping bill goes up by 10%’ and if there is a more orderly Brexit, this figure will stand at around 6%.

Carney’s comments caused the Pound to be dragged down against major currencies as Sterling has been buoyed by the statements of European Court Justice advocate general, Manuel Campos Sánchez-Bordona, who signaled that the UK could remain in the European Union without the permission of the other member states, effectively abandoning Brexit.

EUR/GBP Exchange Rate Outlook: Will Strong Eurozone Data Push Down Sterling?

Eurozone Q3 GDP is set to be released tomorrow morning, which is likely to cause movement in the EUR/GBP exchange rate as it is expected to show further weakness.

Industrial production figures for Germany are also set for release tomorrow, and if the figure increases in October compared to September as expected it is likely that the Euro will claw back some of its losses made in today’s session.

Industrial output figures for France are also scheduled to be released for October, and this could aid a Euro rise as the forecast suggests this figure is going to jump from -1.8% to 0.7%.

With the lack of British data releases for the rest of this week’s session, it is likely that developments in Theresa May’s final push of her withdrawal agreement is likely to cause movement in the UK currency.
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