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Pound Euro Exchange Rate News: GBP/EUR Flat as May Updates MPs on Brexit

February 12, 2019 - Written by John Cameron

Pound (GBP) Exchange Rate Muted on May’s Brexit Update

The Pound Euro (GBP/EUR) exchange rate traded in a narrow range on Tuesday as Theresa May addressed the House of Commons, ahead of a debate on the next steps in Brexit on Thursday.

In a statement to MPs, the Prime Minister gave an update on the current state of Brexit negotiations.

Any investors hoping for some major revelation were left sorely disappointed however, with May informing MPs that her talks with European Commission President, Jean-Claude Juncker failed to persuade the EU to reopen the withdrawal agreement.

This ultimately saw May concede that she has been unable to secure any concessions on the Irish Backstop.

However unwilling to give up on her withdrawal agreement, May asked for the Commons to give her some more time to pursue the ‘mandate’ that she had been given by MPs, while promising a ‘meaningful vote’ after holding further talks with the EU.

The PM stated that should no agreement be reached by 26 February then MPs should have a non-binding vote on Brexit options.

Labour leader Jeremy Corbyn was unimpressed by May’s push for another delay however, responding to her statement by saying:

‘We were promised a meaningful vote on a deal in December, it didn't happen. We were told to prepare for a further meaningful vote this week after the prime minister again promised to secure significant and legally binding changes to the backstop and that hasn't happened.

‘Now the prime minister comes before the House with more excuses and more delays.’

The response from currency markets appeared more measured however, with the Pound holding its ground despite Theresa May’s update doing little to clear up some of the uncertainty surrounding Brexit.

Euro (EUR) Exchange Rate Flat Following Eurozone Warning

Meanwhile the Euro (EUR) also struggled to find momentum on Tuesday, following warnings that the Eurozone is still not crisis proof, and the consequences this may have on the European Central Bank (ECB).

Bundesbank President and member of the ECB, Jens Weidmann, warned on Tuesday that the ECB would be forced into a reactionary position should another crisis emerge.

‘Certain issues like the lack of credibility of fiscal rules or the harmful sovereign-bank nexus still have to be adequately addressed. Acting beyond the mandate would also undermine people’s trust in the central bank, at the end of the day, it could become more and more difficult for the European Central Bank to focus on its promise of a stable currency.’

GBP/EUR Exchange Rate Forecast: Slowing UK Inflation to Dent Sterling?

Looking ahead, the Pound Euro (GBP/EUR) exchange rate is likely to come under pressure in the second half of the week as the UK publishes its latest Consumer Price Index (CPI).

Economists forecast that Wednesday’s CPI figures will reveal UK inflation slowed from 2.1% to 1.9% in January, dropping below the Bank of England’s (BoE) target of 2% for the first time since 2017.

This is likely to further dampen any hopes that the Bank could raise interest rates in 2019 and potentially denting the appeal of Sterling.

However the Pound may bound back in the very end of the session, with the UK’s latest retail sales figures expected to report that sales growth saw a modest rebound in January.

Meanwhile the release of the Eurozone’s latest industrial production figures could soften the Euro on Wednesday as economists forecast output will have contracted again in December.

The main focus for EUR investors in the second half of the session however is likely to be on Germany’s latest GDP estimate, with the single currency potentially finding some support if Europe’s largest economy managed to avoided falling into a technical recession at the end of 2018.

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