GBP/EUR: Brexit & UK GDP In Focus

The pound euro exchange rate traded broadly flat across the previous week, closing just 0.15% higher. The pair gained ground in the first half of the week, reaching a peak of €1.1814, before paring those gains across the second part of the week to close at €1.1741. The pound is trading lower at the start of the new week.

Stronger than forecast service sector pmi data helped boost the pound at the start of last week. The pmi for December was revised upwards from 49 to 50, narrowly avoiding contraction and boosting confidence in the UK economy.

The UK Withdrawal Bill progressing through the House of Commons without a glitch also helped underpin steering. However, European Commission President Ursula von der Leyen reaffirming the pessimistic view that a one year is just not enough time to agree a trade deal, darkened the mood towards sterling.  Speculation over the EU – UK relationship will remain a key driver of the pound this week.

Comments by Bank of England Governor Mark Carney later in the week also pulled the pound sharply lower. In one of his final speeches as Governor, Mark Carney gave one of the biggest hints yet that the central bank could be cutting interest rates sooner rather than later. The pound fell on the prospect of loser monetary policy.

Given Mark Carney’s comments, UK macroeconomic indicators could have the potential to rock the market this week. UK GDP and industrial production reports are due today, followed by inflation data on Tuesday and retail sales at the end of the week.

Quiet Start For Euro

The euro lost ground across the previous week as investors shrugged off a series a series of upbeat economic data readings from the region. Investors shrugged off better than forecast German industrial production figures and a tentative rebound in the eurozone manufacturing sector.

Instead the euro proved to be more susceptible to international developments and the dollar. The euro trades inversely to the greenback, which advanced after Iran and the US indicated they would not elevate tensions further,

This week is a quieter week on the eurozone economic calendar. The first high impacting release is not due until Wednesday, with German GDP figures.

 

What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 GBP = 1.13990 EUR

Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound.

Or, if you were looking at it the other way around:

1 EUR = 0.87271 GBP

In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro.

 


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