GBP/EUR Exchange Rate Rangebound as ECB-Germany Tensions Over Bundesbank Rise
The Pound to Euro (GBP/EUR) exchange rate held steady today, with the pairing currently trading around €1.21.
The Euro (EUR) is rangebound against Sterling today despite rising fears that the European Central Bank (ECB) could be preparing to carry out a multi-trillion bond buying programme without Germany’s Bundesbank.
According to analysts at Reuters,
‘In this worst-case scenario, the ECB would launch an unprecedented legal action against the German central bank, its biggest shareholder, to bring it back into the programme.’
‘The moves would likely mark a moment of truth for the euro, testing Germany’s commitment to a currency it played the biggest role in creating and forcing it to tackle some deep-seated reservations within the country about ECB policies.’
As a result, many single currency traders are feeling anxious ahead of the speech by Christine Lagarde, the President of the ECB, later today.
Any indications that the central bank could be preparing to move forward without Bundesbank would send the Euro downward.
Meanwhile, today saw the publication of the French consumer confidence figure for May, which beat forecast at 93.
However, with the French statistics office predicting the economy to shrink by as much as 20% in the second quarter, the outlook for the Eurozone’s second-largest economy looks grim.
Pound (GBP) Steady as BOE Says UK Economic Data is a ‘Shade Better’ Than Forecast
The Pound (GBP) remained subdued today despite the Bank of England’s economist, Andy Haldane, commenting that UK economic data has been a ‘shade better’ than forecast.
Mr Haldane commented:
‘This is perhaps still a V but perhaps a fairly lopsided V[-shaped recovery]. The risks to that probably … lie to the downside rather than the up and as I say, a rather more protracted recovery even than the one that I have mentioned.’
Meanwhile, Sterling traders are remaining cautious as the Conservative Party revoltes over Prime Minister Boris Johnson’s aide, Dominic Cummings. This follows an increasing number of Tory MPs calling for his resignation.
As a result, the Pound (GBP) has remained under pressure from the UK’s domestic political uncertainty.
However, positive news arrived in the form of the European Union’s willingness to ease fishing demands in Brexit talks. Consequently, the Pound (GBP) held steady on growing hopes that UK-EU trade talks could make progress next month.
GBP/EUR Outlook: Could Conservative Party Tensions Weaken the Pound?
Euro (EUR) traders will be looking ahead to tomorrow’s release of Germany’s flash harmonized inflation figure for May. Any signs of the Eurozone’s largest economy’s improvement this month would prove Euro-positive.
Tomorrow will also see the release of the Eurozone’s business climate report for May. However, if this improves, we could see the single currency rise.
Meanwhile, UK economic data remains sparse this week, with investors focusing on domestic political and coronavirus developments instead.
The GBP/EUR exchange rate could fall if tensions within the Conservative Party mount over Dominic Cumming’s position within the party.
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