GBP/EUR: Brexit Nerves Weigh On Pound
  • Pound (GBP) makes mild gains 
  • UK CPI data Wednesday could lift GBP
  • Euro (EUR) under pressure on USD strength
  • German inflation & ZEW Economic Sentiment data

The Pound Euro (GBP/EUR) exchange rate is trading a few pips higher after a quiet previous session. The pair flat on Monday at €1.1248 towards the high of the day. At 05:15 UTC GBP/EUR trades up 4 pips at €1.1250.

The UK’ vaccination rollout as well as Brexit are very much in focus amid problems exporting since Brexit. According to Bloomberg the rejection rate for cross channel cargo has risen to 168% of the third quarter average. The Brexit deal will be voted on in the House of Commons and there is pressure for a better deal. The situation will be monitored carefully.

There is no high impacting UK economic data due for release today. Looking ahead the Pound could finds strength following UK inflation data. Inflation, as measured by the consumer price index (CPI) is due to be released on Wednesday. Inflationary pressures are expected to have picked up both on a monthly basis and an annual basis.

Should the data show that inflation has ticked higher to 0.5%, up from 0.3% year on year then the Bank of England could be encouraged to hold back from negative interest rates and easing monetary policy further, at least for now.

The Euro was under pressure once again at the start of the week owing to a strengthening US Dollar. The risk off mood in the market amid surging covid cases and tighter lockdown restrictions saw investors buy into the safe haven greenback at the detriment of the Euro.

Today there is plenty of macro data to drive the common currency. German inflation is expected t confirm a 0.5% month on month increase in December and -0.3% annual decrease. German XZEW economic sentiment will also be in focus, with analysts expecting an pick up in the economic sentiment index from 55 to 60 in January.