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Pound euro exchange rate holds steady as ‘golden decade’ of German economic growth ends | City & Business | Finance

Euro traders have remained cautious, however, after yesterday saw the publication of Germany’s growth report, which showed its slowest rate of growth since 2013. Holger Schmieding, an analyst at Barenberg Bank, was pessimistic about the Eurozone’s powerhouse economy, commenting: “The golden decade Germany has seen for growth is gradually coming to an end.” The euro failed to gain after the European Central Bank (ECB) revealed an upbeat forecast in its December 12 policy meeting, the summary for which was released today, which revealed that the bank saw an overall “stabilisation in euro area growth”. 

Carsten Brzeski, the Chief Economist at ING Germany, commented that the ECB’s minutes had revealed a subtle improvement in the bank’s outlook. 

Mr Brzeski added: “In general, the ECB is sticking to its view of a moderate recovery later on, while the growth outlook remains muted in the near term.”

The pound has remained relatively unmoved today following yesterday’s weaker-than-expected year-on-year UK inflation figure, which fell to a three-year low of 1.3 percent.

This has increased pressure on the Bank of England (BoE) to cut interest rates as early as this month. 

One of the central bank’s policymakers, Michael Saunders, commented on the inflation report, saying: “This gives the Bank of England all the excuse it needs to cut later this month.”

Brexit uncertainty has also held back the pound’s gains today, after Phil Hogan, the EU’s Trade Commissioner, said that a UK-EU trade relationship by the end of 2020 was “not possible”. 

Mr Hogan commented: “Certainly by the end of the year we are not going to get everything that’s in the 36-page document on the future relationship agreed because [Prime Minister Boris Johnson] decided we are going to have everything concluded by the end of the year.”

The pound euro exchange rate could sink tomorrow if the UK retail sales report for December falls below forecasts as this would provide further impetus for the Bank of England to go ahead with a rate cut on the 30 January.


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