GBP/EUR: Focus on British and Italian policy and German consumer confidence

  • The British Pound (GBP) rises for a second day despite the problems of the Prime Minister
  • The party gate report will be released shortly
  • Euro (EUR) struggling amid rising political concerns in Europe
  • EUR Turns to German Consumer Confidence Data from GFK

The Pound Euro exchange rate (GBP/EUR) held steady on Thursday after two consecutive days of gains. The pair gained 0.26% in the previous session, settling at €1.1975 towards the high of the day. As of 05:45 UTC, GBP/EUR is trading -0.02% at €1.1973.

The pound pushed higher in the previous session on improving market sentiment and despite the growing political storm in London.

An official investigation into several parties held at 10 Downing Street during the lockdown is due to be released shortly. It is unclear when the report will be released. However, before it was published, Prime Minister Boris Johnson said he would resign if he had misled parliament.

The pound may not suffer in the medium term if Boris is forced out of his job. Indeed, the frontrunners to replace Johnson still have similar policies. Current Chancellor Rishi Sunak is seen as the most likely candidate to replace Boris Johnson. Should he take power, there would be no obvious implications for the UK economy or the UK’s stance on Brexit.

Today there is no high impact UK data, so politics will remain firmly in focus, in addition to developments in Eastern Europe. Britain has hinted at sanctions against President Putin, prompting a response from the Kremlin that such a move would be destructive.

The euro came under pressure in the previous session, pushed lower by a stronger US dollar and growing political concerns in Italy over the future of Prime Minister Mario Draghi’s current government. Draghi’s government, in power since February 2021, risks collapse if Draghi becomes president and is replaced by a less effective prime minister.

Today, European investors will look to GFK’s German Consumer Confidence release. Analysts expect consumer confidence to decline to -7.8 in February from -6.8 in January.

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