Published On: Fri, Aug 30th, 2019

Pound euro exchange rate: GBP/EUR edges higher on Eurozone’s economic woes | City & Business | Finance

Bert Colijn, Senior Economist at financial services company ING, commented: “While core inflation has not moved out of the 1 [percent] range for quite some time now, drivers of inflation have not provided much reason for optimism about a quick core inflation recovery in the months ahead.” Euro traders are increasingly nervous, with today’s inflation figure falling well below the European Central Bank’s (ECB) 2 percent target and further bolstering the case for September stimulus measures. In political news, Italy remains under the spotlight as Prime Minister Giuseppe Conte underscores last week’s coalition collapse by vowing to lead a “more united, inclusive” Italy. 

European markets heaved a sigh of relief when the anti-establishment Five-Star Movement and centre-left Democratic Party agreed to form a new coalition, pushing Deputy Prime Minister Matteo Salvini’s Eurosceptic League party into the opposition. This greatly lessens the threat of a potential Italian exit from Europe.

Nevertheless, the Eurozone’s economic woes refuse to go quietly into the night, exerting an ineluctable downward pressure on the euro.

Despite today’s release of August’s UK GfK consumer confidence, which delivered a worse-than-expected -14, a Brexit-beleaguered pound still managed to edge higher against the euro.

Joe Staton, Client Strategy Director at GfK, said: “Until Brexit leaves the front pages – whenever that will be – consumers can be forgiven for feeling nervous not just about the wider economy but also about their financial situation.”

UK political developments remain in focus today, with cross-party opposition to Prime Minister Boris Johnson’s prorogation of parliament gaining ground. 

Legislative methods to prevent parliament’s suspension are now being proposed by MPs across parties, but the window for legislation to pass before the rescheduled Queen’s speech is exceedingly narrow.

Lord Doherty, a Scottish judge, has already temporarily ruled out the first injunction proposal from anti-Brexit MPs, leaving Sterling traders increasingly wary of a no-deal outcome. 

Looking ahead, the GBP/EUR exchange rate will remain volatile into next week as UK political tensions look set to escalate. A scheduled hearing against the prorogation is due to take place on Tuesday. 

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