With French Gross Domestic Product (GDP) hitting the floor on Friday morning, markets might not be blamed for thinking the Pound could make some gains against the Euro (GBP/EUR), but with Brexit in the background, the Sterling exchange rate is feeling the pressure.
French GDP Growth Sinks – EUR Exchange Rate Remains Stable
French GDP came in at 0.2% in the second quarter on a quarter-on-quarter basis, while the annual figure slipped from 2.2% to 1.7% and it’s now speculated that Emmanuel Macron’s government will fail to hit its growth targets for 2018.
The downturn has been attributed to industrial action in French transport. Statistics agency INSEE commented:
‘In services, the slowdown was notably driven by the downturn in transport expenses (-3.2% after +1.0%) mainly in rail transport as a result of strikes.’
Brexit Deal Rejection Keeps Pound Sterling Exchange Rate in Check
However, while the market brushes off the weaker French growth numbers, Theresa May’s breathing space seems to be closing in. The proposal put forward by the PM and her team which attempted to strike a compromise for all members of Parliament has been rejected, leaving May in a sticky situation.
With only 12 weeks until a deal needs to be struck and signed on the dotted line, May’s in a precarious position. Can she create a deal that doesn’t give the rest of the Conservative Party the opportunity to challenge her leadership? The potential for a no deal Brexit is increasing and markets will be watching developments very closely. The Pound to Euro (GBP/EUR) exchange rate could move significantly should a no deal exit occur.
Similarly, the Pound to US Dollar (GBP/USD) which has been trending in the region of 1.31 could drop back near disappointing levels of 1.20 should the UK barge out of the EU without an agreement. While the government tries to reassure the masses by stockpiling food and supplies, unrest is rife.
The Pound to US Dollar (GBP/USD) exchange rate is trending at 1.3113. The Pound to Euro (GBP/EUR) exchange rate is trading at levels of 1.1261.