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EUR to GBP Exchange Rate Boosted by Germany’s Return to Growth and Steady Eurozone Data

May 15, 2019 - Written by John Cameron

The Euro has risen against the Pound (EUR/GBP) today and is up around 0.4%, hitting £0.8716 as the latest Eurozone growth figures revealed a steady if unimpressive expansion of 0.4% in Q1.

On the other side of the pairing, news that UK Prime Minster Theresa May is planning to reintroduce her thrice-defeated Brexit withdrawal bill to Parliament in early June failed to enthuse Sterling investors, who decided to back the Euro instead.

The prospect of more months of Brexit gridlock has thus scared off investors from the Pound today, and with little likelihood of there being a cross-party agreement being reached on the issue, the UK currency is likely to remain muted for the rest of the week in the absence of any further data.

EUR Exchange Rates Strengthen as German GDP Turnaround is Described as ‘Balm for the Soul’

According to data published by Destatis, Germany’s economy expanded by 0.4% over the first quarter of 2019, which represents something of a recovery after hitting a slow patch towards the end of 2018.

This comes as a relief to EUR investors, many of whom had feared the Eurozone’s largest economy could have fallen into recession in the first half of 2019 after a string of gloomy data releases.

Carsten Brzeski, Chief Economist at ING Germany said: ‘Today’s GDP data is balm for the soul of the German economy. It also confirms our long held view that not all is bad in the German economy.’

Despite this, analysts have warned that Germany should not take this growth for granted, and that more needs to be done to encourage investment in the country if it is to avoid a repeat of last year’s slowdown.

Brzeski cautioned: ‘Just as weak GDP data in the second half of 2018 was not purely a result of wrong policies and business decisions or a sign that the German economic business model should be discarded, so today’s strong data is no reason for complacency.’

GBP Exchange Rates Limited by the Return of Brexit Anxiety as May Promises Further Parliamentary Vote

While the Euro has had something to celebrate today the Pound has weakened as markets digested the news that Theresa May planned to hold another parliamentary vote on Brexit next month, regardless of whether the Conservatives and Labour have reached a deal by then or not.

May said the passing of her bill was ‘imperative’ if the UK was to leave the EU before Parliament adjourns for summer, suggesting the only alternatives will be a no-deal Brexit or to revoke Article 50 altogether and stay in the EU.

However, with Parliament having already rejected the PM’s Brexit bill on three occasions, traders are unsurprisingly sceptical that it will pass this time.

EUR/GBP Exchange Rate Forecast: EU Elections to Weigh on Sterling Sentiment over Coming Week

For the rest of this week we may see the EUR/GBP exchange rate capitalise on its momentum as a complete lack of UK-focused data leaves Sterling at the mercy of Brexit developments.

Euro investors are likely to be bracing for the upcoming EU elections amidst signs that Eurosceptic parties look set to upset the status quo and win a significant number of seats this year.

In the meantime, however, there will be two speeches from European Central Bank policymakers this evening, while tomorrow’s Eurogroup meeting could offer investors a clue about Eurozone monetary policy.

Trade balance figures for the Eurozone are due out on Thursday morning, which could give the Euro a boost if they surprise to the upside, and Friday’s slew of influential inflation data will furthermore offer markets guidance on how to price the single currency.

Last but not least will be Friday’s Eurozone construction output figures for March, which are set to deteriorate on the month, possibly causing the EUR/GBP exchange rate to end the week on a muted note.

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