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Pound to Euro Exchange Rate Live: Sterling Falls as EU Relieved by Italy?s Budget Concessions

December 19, 2018 - Written by John Cameron

GBP/EUR Exchange Rate Dips as Italy Arrives at Consensus with EC over its Budget

The Pound Euro (GBP/EUR) exchange rate is down today, and is currently trading at €1.1097 after news that Italy and the European Commission (EC) have arrived at a consensus over Italy’s controversial budget for 2019.

Euro (EUR) investors, however, have remained generally cautious after French President Emmanuel Macron capitulated to ‘yellow vests’ protestors last week by cutting taxes and breaching the European Union’s deficit regulations.

The Pound (GBP), meanwhile, has shown volatility with markets remaining cautious over recent Brexit developments, following British Prime Minister Theresa May’s failure to renegotiate crucial aspects of her withdrawal deal with the EU last week.

Yesterday’s release of the UK Retail Price Index for November also dampened confidence in the Pound (GBP), with a decrease to 0.0% on last month’s 0.1%, although this will come as a relief to consumers.

Pound Euro (GBP/EUR) Exchange Rate Slips as Theresa May Comes Under Fire for ‘No-Deal’ Threat

Today also saw the publication of the UK Consumer Price Index figures for November which showed a decrease at 1.8% against October’s 1.9%.

These were followed by weaker PPI figures for November which also showed a decrease.

However, these data releases have been overshadowed by the UK government announcing that it is ramping up its ‘no-deal’ contingency plans.

Theresa May came under further fire today, with political strategist, John McTernan, commenting:

‘She would be foolish if she thought her no deal plans could play to the European Union, but no doubt she does in some way because she seems quite foolish in the way she treats the European Union and Ireland.’

EUR/GBP Exchange Rate Rises as Matteo Feels ‘Great Satisfaction’ Over Italy and EU Budget Renegotiation

Euro (EUR) traders have remained generally cautious despite Italy’s proposed budget revision, which is showing signs of being accepted by the EC with Deputy Prime Minister Matteo Salvini commenting on his ‘great satisfaction’ over the result of recent meetings.

However, Italy’s Prime Minister Giuseppe Conte cautioned:

‘It is necessary to wait for the procedure to be completed in order to consider the negotiation definitively concluded.’

The Euro (EUR) has also been weakened by the UK government’s ramping up of ‘no-deal’ Brexit preparations which has caused markets to become skittish over fears that the UK will leave the EU without a trade deal.

Today saw the release of Germany’s PPI figures for November which showed a decrease of 0.1% against last month’s 0.3%, dampening market confidence in the Euro (EUR).

GBP/EUR Outlook: Brexit and Italy’s Budget to Remain in Focus

The GBP/EUR exchange rate is likely to be driven by political forces this week, with Theresa May coming under increasing fire from both her Labour opposition and from within her own party, as Sterling traders remain concerned about May’s UK-EU withdrawal deal being rejected by Parliament.

EUR traders, meanwhile, will be occupied with any signs that Italy’s revised budget will be rejected by the EC and further initiate disciplinary procedures levied at Rome. This is causing a general dampening of sentiment in the Eurozone with concerns that increasing political volatility may unsettle its economy.

Tomorrow will see the release of the Bank of England’s interest rate decision, with Sterling traders paying close attention to any signs of bearishness coming into the New Year.

Also tomorrow, we will see the release of the UK retail sales figures for November, which are expected to decrease.

Looking ahead to Friday the UK will see the publication of its Q3 GDP figures, with any signs of an increase likely bolstering GBP.

Friday will also see the release of Germany’s Gfk consumer confidence survey for January, which is expected to decrease ahead of the holiday season.

Overall the Eurozone will not see any more significant data releases until after Christmas, and will be sensitive to any sudden political developments either from the UK, in regards to Brexit, or with Italy’s controversial budget revision, which will likely dictate the GBP/EUR exchange rate in the coming week.

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