gbp-and-eur-coins
  • Pound (GBP) slips as Brexit concerns linger
  • UK service sector PMI expected to confirm 55.1 expansion
  • Euro (EUR) was under pressure last week after inflation figures showed that disinflation in the bloc continues
  • ECB have more reasons to ease policy further

The Pound Euro (GBP/EUR) exchange rate is trading mildly lower at the start of the new week. The pair is easing back after booking gains of 0.77% across the previous week, closing on Friday at €1.1039, off the high of the week €1.1079. At 05:15 UTC, GBP/EUR trades -0.08% at €1.1029

The 9th round of Brexit talks last week saw little progress and the EU announced that it will start legal action versus the UK over the Internal Markets Bill. More trade talks are due in London this week and again in Brussels the following week before European Union leaders meet on 15 – 16th October to assess the progress of talks. The British government has set 15th October as a self-imposed deadline. If a deal is not outlined by then, the UK will begin preparations to leave the transition period on 31st December under unfavourable World Trade Organisation rules.

In an interview over the weekend, the Prime Minister Boris Johnson said that whilst he didn’t want a no trade deal Brexit, he believes that Britain could still prosper under such as outcome.

Meanwhile concerns of tighter lockdown restrictions in the UK grow, which are adding pressure to the Pound

UK services sector PMI data will be in focus. The dominate UK service sector has shown resilience. August saw activity peak at 58.8. The flash September PMI indicated that this has eared slightly to 55.1.

The Euro has been trading on the back foot over the past few week as investors fret over the rising number of covid cases and tightening lockdown restrictions.

Weak inflation is another headache for the European Central Bank. Inflation, as measured by consumer prices fell further below zero in September. Whilst the decline was caused by temporary factors, the longer that disinflation lasts the more concerning it becomes.

The data released on Friday has given the ECB plenty of reasons to consider more stimulus this year.

 

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