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Pound Euro (GBP/EUR) Exchange Rate Rises as Spanish General Election Called

February 15, 2019 - Written by John Cameron

GBP/EUR Exchange Rate Rises as Spanish CPI Figures Fall

The Pound Euro (GBP/EUR) exchange rate is up today and is trading around €1.1361 on the inter bank market.

The Euro struggled against the Pound today following the publication of Spanish CPI figures for January, which fell by 1.3%.

These were followed by disappointing Italian EU trade balance figures for December, which fell to € 0.613bn.

Meanwhile the Spanish Prime Minister, Pedro Sánchez, has called for a snap general election for 28 April following the rejection of the government’s national budget by Catalan secessionists and other parties.

Sanchez said:

‘Spain needs to keep advancing, progressing with tolerance, respect, moderation and common sense… I have proposed to dissolve parliament and call elections for 28 April.’

EUR investors are remaining increasingly cautious as political upheavals continue to wrack the European Union, and with the UK’s Brexit and Spain’s recent domestic political disputes – as well as the feud between France and Italy – market confidence in the single currency is slipping.

The Pound, meanwhile, gained on the Euro today following better-than-expected retail sales figures for January, which soared to 1.0%.

Thomas Pugh, an economist at Capital Economics, commented:

‘In contrast to the Brexit pessimism, which seems to be weighing on other sectors, the rise in retail sales volumes in January implies that consumers are still willing to spend.’

GBP/EUR Exchange Rate Rises as May ‘Carries On’

Many GBP traders are turning their attention to Brexit developments after Prime Minister Theresa May faced a humiliating defeat in Parliament last night, which further highlighted the lack of faith both parties have in May’s Brexit strategy.

However, last night’s vote had no legal leverage, with the Commons Leader Andrea Leadsom saying:

‘[The vote was] more of a hiccup than the disaster that is being reported. . . The prime minister carries on.’

Many GBP investors are remaining cautious, however, as the fractions on show in the House of Commons last night have raised concern of a possible no-deal.

Theresa May is now in a more difficult position to negotiate with the EU, as growing frustration is evident as the UK struggles to secure clarity on its Brexit position.

The Dutch Prime Minister, Mark Rutte, commented:

‘Some British parliamentarians say that we want to trap them in a permanent limbo… The EU is interested in moving to the next phase as soon as possible and starting a new relationship with the United Kingdom.’

GBP/EUR Outlook: Pound Volatility Forecast on Brexit Developments

GBP traders will be looking ahead to next week, with Tuesday seeing the publication of the UK average earnings – excluding bonus – figures for December, and with any signs of an increase the Pound could rise.

Tuesday will also see the publication of Germany’s ZEW survey of economic sentiment for February, which is expected to decrease and potentially weakening the EUR/GBP exchange rate further.

The GBP/EUR exchange rate is likely to remain dictated by political developments next week as time ticks down for Theresa May’s Brexit deal, and now as mounting pressure increases, it is highly probably that the Sterling will fluctuate.

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