Pound euro exchange rate: GBP/EUR falls on Brexit deadlock German economy avoids recession

Carsten Brzeski, a Chief Economist at the German ING, remained hopeful, however, saying: “The GDP components provide interesting insights: the German economy is in a better shape than its current reputation… However, in a couple of months, the German economy should be able again to show its true colours.”

EUR sentiment improved slightly yesterday in reaction to the European Central Bank’s (ECB) meeting minutes which showed a generally bullish outlook for 2019.  

Today, however, saw the release of the German IFO expectations figures for February, which came in lower-than-expected.

The expectations measure came in at 93.8, down from 94.3. 

Meanwhile, the Eurozone’s inflation data came in at 1.4 percent year-on-year in January from 1.6 percent the previous month, and significantly down on its 2.3 percent October high.

Euro traders’ focus will now turn to the speech by President of the ECB, Mario Draghi, later today.

After yesterday’s disappointing Eurozone manufacturing figures Draghi may have some dovish comments about the state of the economy. 

However, the GBP/EUR exchange rate may struggle to gain as Brexit tensions and political uncertainty persist.  

Increasing divides within the Conservative and Labour parties are amplifying concerns that there will be a lack of consensus within the Commons to secure a deal with the EU. 

Andrew Percy, a Conservative MP, warned Mrs May today by saying: “Whilst we fully expect some changes to the backstop arrangements to be made by ministers in Brussels this week, there remains a chance that these will not satisfy some [of my] colleagues.”

The pound is likely to remain sensitive to Brexit developments into the coming week, with Mrs May once again rallying to gain support for her withdrawal agreement amid an increasingly divided Parliament. 

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