Pound Euro (GBP/EUR) Exchange Rate Sinks Despite Germany Slashing 2019 Growth Forecast

March 19, 2019 - Written by John Cameron

STORY LINK Pound Euro (GBP/EUR) Exchange Rate Sinks Despite Germany Slashing 2019 Growth Forecast

GBP/EUR Exchange Rate Falls as Germany’s Economic Boom Fades

The Pound Euro (GBP/EUR) exchange rate is down today and is currently trading around €1.168 on the inter-bank market.

The Euro (EUR) gained on a weakened Pound (GBP) despite a panel of German economic advisers slashing the growth forecast for this year to 0.8%.

Christoph Schmidt, an adviser at Germany’s Council of Economic Experts, commented:

‘The German economy’s boom is over for the time being. However, given the robust domestic economy, a recession is currently not to be expected.’

Today also saw the release of the German ZEW Survey into economic sentiment for March, which came in at a better-than-expected -3.6, but this failed inspire Euro traders.

The Eurozone’s labour cost figures for the fourth-quarter also fell below expectation today, further weighing on market confidence in the single currency.

The Pound, meanwhile, has fallen against the Euro today following the House of Commons Speaker, John Bercow, ruling out a third ‘meaningful vote’ on Theresa May’s Brexit deal yesterday. Another vote would only be permitted, he said, if there were ‘substantial’ modifications to the withdrawal deal.

GBP/EUR Exchange Rate Sinks as May Under Pressure for Brexit Extension

Sterling has continued to weaken today as Theresa May is coming under increasing pressure from the EU to clarify her reasons for an extension of Article 50.

The German Chancellor, Angela Merkel, commented today:

‘Now, we will see what Theresa May says to us, what her wishes are - we will try to respond to those ... We will watch very attentively how the British government reacts to what was said yesterday in parliament and then deal with the situation. I cannot evaluate what it will be on Thursday – much too much is in flux.’

However, with just 10 days to go until the UK is due to leave the EU, this is causing many Pound traders to remain cautious. It has also been reported that the EU will not meet with Theresa May for the next few weeks, and will decide on an extension during the EU summit which takes place on Thursday.

GBP/EUR Forecast: Sterling Could Rise on Extension to Article 50

Euro traders will be looking ahead to the publication of the German Producer Price Index figures for February tomorrow, and with any signs of an improvement this could provide some uplift for the single currency.

Pound investors, meanwhile, will be awaiting tomorrow’s release of the UK Retail Price Index figures for February, which are expected to increase.

These will be followed by the UK Consumer Price Index figures for February, which are expected to remain at 1.8%.

The GBP/EUR exchange rate will remain sensitive to Brexit developments this week, and with any indications of a long extension to Article 50, this could see Sterling rise against the Euro.

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