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Euro Pound (EUR/GBP) Exchange Rate Rises, Eurozone’s Economic Woes Continue to Weigh on Single Currency

October 21, 2019 - Written by John Cameron

EUR/GBP Exchange Rate Dips, Improving German PPI Fails to Boost Market Sentiment in Euro


The Euro Pound (EUR/GBP) exchange rate eased today, with the pairing currently trading around £0.859 following today’s release of September’s German producer price index which rose above forecast from -0.5% to 0.1%, although this was not enough to boost optimism in the Eurozone’s flagging economy.

Today also saw the year-on-year German PPI ease by -0.1%, which added yet further pressure on the European Central Bank (ECB) to adjust its monetary policy to bolster the flagging Eurozone economy before the end of the year.

Germany’s Bundesbank commented:

‘German economic output could have shrunk slightly again in the third quarter of 2019. A recession in the sense of a significant, broader and longer-lasting decline in output with underutilised capacity is currently not in view.’

Euro traders will be looking ahead to a speech by Luis De Guindos, the Vice-President of the ECB, today. Any dovish remarks about the state of the Eurozone economy could also place further downward pressure on the single currency.

GBP/EUR Exchange Rate Edges Higher on Brexit Delay Hopes


The Pound (GBP) edged higher against the Euro (EUR) after German Finance Minister Peter Altmaier said that it ‘goes without saying’ that the EU would grant a Brexit extension beyond the October 31 deadline.

Mr Altmaier commented:

‘We have already twice agreed to an extension. I have repeatedly said as my own opinion I am not ideologically opposed to extending again a few days or a few weeks if you then get a good solution that excludes a hard Brexit.’

As a result, Sterling rose against the single currency as UK markets are feeling increasingly optimistic that the UK could avoid a disorderly exit on Halloween.

Today also saw John Bercow, the House of Commons Speaker, rule out a ‘meaningful vote’ on Boris Johnson’s Brexit deal.

Mr Bercow said:

‘My ruling is that the motion will not be debated today as it would be repetitive and disorderly to do so.’

Pound traders will be looking ahead to today’s speech by Andrew Haldane, the Chief Economist at the Bank of England. Any dovish comments about the British economy, however, could see Sterling lose some of its gains.

GBP/EUR Outlook: Could Sterling Rise on a ‘Meaningful Vote’ on Brexit Deal?


Sterling traders will be looking ahead to September’s UK public sector net borrowing figure, which is expected to rise from £5.766 billion to £8.700 billion.

Meanwhile, Euro investors will be focusing on tomorrow’s ECB lending survey report, which could provide some insights into the governing council’s monetary and economic developments. However, with expectations being generally downbeat, any confirmation of a flagging economy made during the survey could further weigh on Sterling.

Brexit will remain firmly in the driving seat for the EUR/GBP exchange rate this week. Any indications that the Government could secure a meaningful vote could benefit the Pound, as with rising expectations that Boris Johnson could secure a majority means that this would effectively eliminate the possibility of a no-deal by the end of the month.

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