GBP/EUR: Will UK Service Sector PMI Drag Pound Lower?
  • Pound (GBP) struggles under Brexit pressure, as EU & UK play blame game
  • UK inflation data could show CPI rebound after a weak August reading
  • Euro (EUR) has remained resilient despite surging covid cases
  • ECB Christine Lagarde outlines the risk of covid resurgence ahead of ECB policy meeting next week

The Pound Euro (GBP/EUR) exchange rate is pushing higher on Wednesday, snapping a 3-day losing streak. The pair settled -0.5% lower at €1.0946 in the previous session, towards the lower end of the daily traded range. At 05:15 UTC, GBP/EUR trades +0.1% €1.0955.

Brexit continues to be a frustration all round. Both the EU and the UK blamed the other and urged the other to make compromises in order to for a no trade deal Brexit to be avoided. The game of Brinkmanship appears to be going right to the end.

Failure to reach a deal would result in chaos across supply chains and add economic pain to that caused by the coronavirus. Whilst the EU has offered to intensify talks and open discussions on legal text, the UK insists that there is no basis upon which to continue talks.

German Chancellor has said that she thinks that there is less than a 50% chance of a Brexit trade deal being achieved.

There has been little data released this week to distract Pound investors from the ongoing Brexit drama. Today that changes with the release of inflation data, as measured by consumer price index. Analysts are expecting inflation to increase +0.5% in September compared to the previous month. This would be up from -0.4% the previous month.

The Euro has remained resilient across the board this week, advancing versus its peers despite surging covid cases. There has been very little data wise from the region, instead ECB speeches have been plentiful.

Once again European Central Bank President Christine Lagarde will speak. The ECB President said that the unexpected early pick up of covid cases is a clear risk to the economic outlook. Scientists had been expecting a resurgence in November or December. Her remarks come ahead of the ECB monetary policy announcement next week.