- EUR under pressure after disappointing eurozone and German data
- Concerns that Brexit could end without a trade deal put pressure on Pound
Pound sterling declined by 1% versus the euro in the previous week as no trade deal Brexit fears overshadowed concerns that the German manufacturing slump may not be over.
The pound euro exchange rate dropped to a low of €1.1711 before managing to end the week at €1.1780.
Pound to Euro exchange rate: EUR under pressure after disappointing eurozone and German data
The euro was under pressure in the previous week as a slew of eurozone and German data disappointed, indicating that the bloc’s economy remains weak. Hopes from the beginning of the year that the slowdown, particularly in the manufacturing sector could be bottoming out were dashed. They have been replaced by fears that the economic data could get worse before it starts improving. Today’s sentix investor sentiment data is expected to show a decline in confidence.
This week also sees the release of provisional Q4 GDP for both Germany and the eurozone. There is a good chance that it could miss the 0.1% growth forecast. Eurozone industrial production data is also expected to be closely watched and could drag on the euro if Germany’s recent readings are replicated.
Pound to Euro: Concerns that Brexit could end without a trade deal put pressure on Pound
Sterling’s broad losses across the previous week were driven by concerns that the Brexit transition period could end without a trade deal being agreed between the UK and the EU. After a less dovish than expected Bank of England had kept the pound buoyant in late January, not even upbeat PMI data last week could distract investors from growing concerns over UK-EU post Brexit trade relations.
Boris Johnson said he wanted to break with Brussel’s rules as he laid out his vision for EU-UK trade relations, sending the pound plummeting. Meanwhile Michel Barnier said that the two sides must be on a level playing field for a trade deal to be achieved. Failure for the two sides to agree a deal will result in the application of World Trader Organisation rules after the transition period expires. This would be a significant step down from the current arrangement.
This week, Brexit speculation and Boris Johnson’s reshuffle of his cabinet could overshadow UK economic data releases. The UK economic calendar is light this week with Tuesday’s GDP release expected to attract the most attention. This means that investors will have little to distract them the hard-line positions of both the EU and the UK.
