The Pound was up against the euro on Tuesday afternoon following the release of data which showed that German Gross Domestic Product (GDP) rose in line with previous estimates in the fourth quarter. The European Union published its mandate for the upcoming trade talks with the UK. The GBPEUR interbank exchange rate was higher by 0.47% at 1.1957 with a daily price range of 1.19 to 1.198 at midday on Tuesday. GBP rallied in early European trading hours before settling back at the 1.195 level; the gains made on Tuesday left the exchange rate flat on the week at -0.02%.
Rising number of coronavirus cases in Europe weighs on the Euro
A rising number of COVID-19 coronavirus cases in Italy and other parts of Europe has weighed on the euro as other riskier currencies were seeing some relief. The German 10-year yield fell to its lowest level since October as European investors continued to invest in government bonds as a safe haven. The lower yields available in Europe make EUR less attractive than GBP and other higher yielding currencies.
The final reading for German GDP came in line with previous estimates of 0% quarter-over-quarter and 0.3% year-over-year. Survey estimates from purchasing managers shot higher in February in a sign that the first quarter could see Germany return to growth. However, the disruption to the economy from the coronavirus could see that all reverse again in March, risking another disappointing quarter for the German economy. Prior months showed early warning signs of an economic slowdown for both Germany and the Eurozone. Investors will be hoping that the impact of the coronavirus will not buffer this, although predictions for the impact of the disease are impossible to make.
GBP gains on USD weakness, as Brexit mandate has little effect on economy
Gains came for GBP on Tuesday following Monday’s market sell-off. Stock markets, oil prices and risky currencies bounced off their lows whilst gold, government bonds and safe haven currencies saw highs at the start of the week. The publishing of the EU’s Brexit mandate caused little concern for the UK economy, with the guiding principle being that the EU is looking to even the playing field by keeping the UK tied to the bloc’s regulations in exchange for a free-trade deal. The opposite viewpoint is expected to be unveiled by the UK on Thursday with their own mandate.
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