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Pound euro exchange rate: GBP/EUR holds up despite EC putting UK to bottom of the class


Sterling is holding up against the euro today despite a dire warning from the European Commission that places Britain at the joint lowest position in the 2019 EU growth league.

The EC report estimates that UK economic growth would amount to only 1.2% in 2019, against an average rate of 2.0% for the EU as a whole, and far below the likes of Ireland’s expected 4.5% growth.

More concerning still for Sterling investors was the fact that these figures are based on the assumption the UK will leave the EU with a robust trade deal in place – a so-called ‘soft Brexit’.

Were Britain to leave without a deal in place then the growth figure would be lower still.

At the same time Italy remains a major headache for the EU, as the EC economic forecast report also places the fiscally errant country at the bottom of the class with the UK due to the ongoing row between Brussels and Rome over Italy’s draft budget for 2019.

The Commission expects Italy’s economy will grow at a similarly weak 1.2 per cent next year, falling below Rome’s expectation of 1.5% and resulting in Italy running a deficit of 2.9 per cent, which is much higher than the 2.4 per cent predicted in its controversial budget.

In the absence of any significant Eurozone data releases today, this row is likely to remain a major concern for EUR investors, potentially boosting GBP/EUR.

With the euro subdued, GBP/EUR investors are focusing on the latest growth figures to come out of the UK this morning.

Third quarter GDP growth came in at 0.6 per cent, which is a step up from the 0.4 per cent seen in Q2.

This comes as a welcome relief for pound investors, who see it as further proof of resilience in the British economy ahead of Brexit.

Further bolstering confidence was the UK balance of trade figure, which was forecast to come in at £-1.1bn, but instead printed at a much better £-0.027bn – although this was offset by a halt in the growth of industrial production, which showed no growth at all in the month of September.

While traders are still digesting these figures, the GBP/EUR exchange rate has not shown any market movement, and remains trading at a rate of €1.148.  



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