EUR GBP

EURGBP Currency pair flag

Latest EUR GBP Analysis

FX Explained MacroWatch: w/c 09/09/19

Recap: Brexit grabs the headless (again)

Brexit
  • The US and China trade war took a positive turn with a Chinese announcement that trade talks would restart in October.
  • The UK Government had in late August effectively announced the closure of Parliament early (proroguing Parliament), which had allowed limited time for Members of Parliament (MPs) to block the UK leaving the EU on 31st October without a deal.
  • MPs last week did though defeat the Government on three occasions, taking control of the Parliamentary agenda to allow for the passing of a bill that forces the UK Government to ask for a Brexit negotiation extension into January 2020, plus rejecting the Government’s request for a general election in October. This leave a no deal Brexit far less likely now at the end of October.
  • The third significant geopolitical development last week was in Hong Kong, as the extradition bill that had started the pro-democracy demonstrations, was withdrawn.
  • These three positive events saw global stock markets rally higher, whilst safe haven assets like bonds sold off.
  • In the forex space, the Pound allied against both the US Dollar and Euro (GBPUSD higher, EURGBP lower). In addition, the previous US Dollar strength (as a safe haven) was reversed last week as the greenback weakened against many currencies. Except versus the Japanese Yen, which was even weaker, as the ultimate safe haven currency lost ground as global financial markets moved back towards a risk on theme.
  • On the macroeconomic data front, early September has seen Asia and European economic measures worsen, whilst in the US the ISM Manufacturing Index came in below expectations with the Non-Manufacturing Index beating expectations. The US Employment report ended last week and was also mixed, though the Non-Farm Payroll data was marginally below consensus (yet the broad market response was subdued).
  • A big focus this week will be on Thursday’s European Central Bank Meeting, with a potentially far more dovish tone anticipated by the markets.

Key this week

Date Key Macroeconomic Events
09/09/19 China trade data; UK GDP; UK Industrial & Manufacturing Production
10/09/19 China Consumer Price Index (CPI); UK Employment data
11/09/19 US Producer Price Index (PPI)
12/09/19 EU Industrial Production; German CPI; ECB monetary policy meeting; US CPI
13/09/19 US Retails Sales; Michigan Consumer Sentiment Index

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Other major currency pairs


BUY - rate is expected to increase, i.e. the first currency gains value against the second currency.
SELL - rate is expected to go down, i.e. the first currency is expected to lose value against the second currency.


EUR/GBP Live and Historical Rates

The EUR/GBP pair – also known as the Chunnel – is yet another pair made up of two major currencies, which does not itself qualify as a major. The Chunnel is obviously massively influenced by the close correlation of the EU and British economies, and that will likely remain the case after Brexit too. The chart above shows how many GBPs one needs to purchase a EUR.  

The EUR

Used by 21 countries and some 324 million people as official currency, the EUR is the common currency of the world’s biggest economy, the Eurozone. While 7 EU members are bound by treaty to join in the future, in the wake of the 2008 global financial crisis, the appetite on the part of these countries to join the Euro club has quite noticeably subsided. Still, the Euro is used de-facto by at least as many people as the population of the Eurozone, and the currency is the second most traded, as well as the second biggest reserve currency of the world.

The GBP

The British Pound is a high-profile currency as well. In addition to being the world’s oldest currency still in use today, it is the 4th most traded one and the third largest reserve currency behind the USD and the EUR. Viewed by many as a symbol and guarantor of British sovereignty, the GBP was only allowed to float in 1971. During its EU membership, Britain refused to surrender its currency and join the Euro and now with the Brexit procedure launched, the future of the GBP seems assured.

EURGBP Analysis

Due to the close economic interdependence between Britain and the EU (a status-quo likely to survive the impending Brexit too), the GBP and the EUR are quite closely aligned. Carry trading isn’t a profitable option on this pair, due to the small interest rate spread between the currencies.

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