- Pound (GBP) under pressure as Brexit jitters return
- Chancellor’s spending review in focus
- Euro (EUR) supported by upbeat German GDP
- German IFO Sentiment declined for 2nd month but beat forecasts
The Pound Euro (GBP/EUR) exchange rate is edging lower on Wednesday extending losses from Tuesday. The pair settled -0.14% lower on Tuesday at €1.1234, towards the lower end of the daily traded range. At 05:15 UTC, GBP/EUR trades -0.05% at €1.1230.
The Pound came under pressure in the previous session as Brexit jitters once again took hold. Senior Minister Michael Gove said that the EU needs to move too if there is to be a Brexit deal, implying that there is still significant distance between the two sides. Although he did add that he hopes it will be possible to reach an agreement.
With another soft deadline passed and the end of the transition period drawing ever closer, these weren’t the headlines that Pound traders were hoping for.
In addition to Brexit, the Chancellor’s spending review will be very much in focus. The Office of Budget Responsibility’s new economic outlook will be in focus. The last we heard from them back in March they forecast a -13% annual decline in GDP. This could be upwardly revised, although is expected to still be around -11% owing to the impact of the second lockdown. A disappointing outlook could drag on the Pound.
The Euro pushed higher in the previous session after German data beat forecasts. Firstly, data revealed that the German economy grew by 8.5% quarter on quarter in the July – September period, ahead of the 8.2% forecast.
Secondly German IFO Business Climate also showed that morale was slightly better than feared, which underpinned the Euro, even if the index showed another decline. This was the second straight month that sentiment deteriorated, dented by the second wave of covid. The index fell to 90.7 in November, down from 92.5 in October.
There is no high impacting Eurozone data due for release today. This means that sentiment will likely continue to drive the common currency.