Euro/GBP Flat Amidst Brexit and German Economy Slowdown Concerns

Euro/GBP Flat Amidst Brexit and German Economy Slowdown Concerns - Oversized Euro coin in a hand
Bill Cascade   NEW 25/09/2019 00:00:00 Forex

The Euro-British Pound currency pair remained unchanged at the start of the week as traders reacted to developments in the vast European economy.

Weak economic data from Germany, the biggest economy in the trading block, all but continued to arouse recession concerns. The British Pound on its part remained muted as traders remained on edge on developments around Brexit.

Slowing German Economy 

Data from Germany showing that the composite PMI sunk to its lowest level since 2012 all but arousing concerns about weakness in the German economy. Service business activity continues to slow as has been the case for the better part of the year, with the manufacturing sector showing no signs of improvement after recording an eighth consecutive month of a decline.

The German economy is no longer churning jobs as it used to, with the private sector experiencing growth deceleration after six years of growth. The German manufacturing industry has also taken a significant hit, given the uncertainty around trade wars between some of the biggest economies in the world.

A slowing German economy should continue to hurt traders sentiments around the Euro, given that other economies in the region are also struggling with slow growth.

The British Pound bounce back also appears to have stalled as the market await a ruling by the Supreme Court on Prime Minster Boris Johnson move to suspend the British parliament ahead of Brexit. While the Foreign Secretary, Dominic Raab, hinted that the government will abide by whichever outcome, there is growing concern that the Prime Minister will not do so, especially on a ruling that goes against the government.

U.K. Political Brexit Uncertainty 

Political uncertainty continues to take a toll on the British Pound that has come under pressure amidst growing concern about the health of the U.K. economy. As the British Pound remained unchanged against the Euro, it continued to lose ground against the U.s Dollar that has remained resilient for the better part of the year.

The GBP/USD pair was down by 0.4% in Monday trading session amidst fears Johnson will struggle to pull the U.K. out of the E.U. before the October 31 promise. Remarks by the prime minister while in attendance at the United Nations Assembly in New York also appears to have fuelled the pair sell-off.

Mr. Johnson said: “I don’t wish to elevate excessively the belief that there will be a New York breakthrough. I’m not getting pessimistic – we will be pushing ahead, but there is still work to be done.”

Amidst the turmoil in Europe, the US Dollar continued its ascendance against the basket of other major currencies, on economic data underscoring growth in the U.S. economy. Tension in the middle east between Iran and Saudi Arabia also continued to fuel demand for the US dollar which also doubles up as a safe haven in times of turmoil. 

Growing optimism that the U.S. and China will reach an agreement on resuming trade talks also continues to offer support for the US dollar. 

 

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