Daniel Wright
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Euro Loses Ground to the Pound
Sterling makes gains against the euro due to BoE interest rate decision, despite positive German growth forecasts for 2020.
Request a quoteThe GBP to EUR rate was left to ponder the potential outcome of the BoE’s interest rate decision for much of the week. This left the pair relatively flat, with the MPC’s vote balanced on a knife-edge. If that wasn’t enough to keep investors in the EUR occupied, there was the potential impact of Brexit and the impending trade negotiations to consider.
The UK is finally scheduled to wave goodbye to the EU at 23:00 GMT – 00.00 in Brussels – on Friday, kickstarting a transition period until the end of the year.
What Happened to GBP/EUR rates?
Jitters surrounding both – potentially – seismic events caused the pair to briefly drop below 1.17 on Thursday, before regaining its footing. So, when the BoE announced that it had voted to keep rates on hold, the EUR was forced to concede ground to the GBP, causing the GBP to EUR rate to jump in value.
Events in the UK overshadowed news that Germany’s government raised its growth projection for 2020 and pledged €162.4bn investment over four years to keep the Eurozone’s powerhouse economy competitive – one-third more than in the previous parliament.
Looking ahead
In the short-term, the EUR might come under pressure from a tentatively optimistic GBP, following the UK’s departure from the EU. Although gains – if any – are likely to be limited for several reasons: for a start, this historic event has largely been priced into the market already; and once all the excitement dies down, it won’t be long before uncertainty surrounding the tight trade negotiation deadline rears its head, triggering renewed fears of a no-deal scenario.
The Eurozone’s calendar is dominated by influential German data next week, including the Markit PMI Composite on Wednesday, as well as several important releases from the bloc as a whole: the Markit PMI Composite and Retail Sales are released on Wednesday, and the European Central Bank Economic Bulletin and European Commission Economic Growth Forecasts hit the headlines on Thursday.
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