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Pound Recovering (GBP/EUR, GBP/USD) as Markets Await Fed Decision; German Sentiment Sinks

December 18, 2018 11:51 am | Modified December 18, 2018 11:51 am
Brexit, EUR, GBP, Politics, USD | BY Lauren Bessent

The Pound to US Dollar (GBP/USD) and Pound to Euro (GBP/EUR) exchange rates are firmer this morning, awaiting some influential developments such as the Federal Reserve’s interest rate meeting on Wednesday. 

Despite a number of developments taking place yesterday, the currency market didn’t enter a state of turmoil. Prime Minister Theresa May announced that the vote on her Brexit deal would be delayed until the week commencing January 14th. Labour leader Jeremy Corbyn voiced his disappointment that the vote would be held so late, and he chose to table a no-confidence motion in the Prime Minister.

German Sentiment Slips, Dragging Euro Exchange Rate Lower

So far today, Eurozone data has disappointed and the EUR/GBP exchange rate has shifted around 0.25% lower. The German IFO Business Climate number came in at 101.0 in December, down from 102.0 in November, and weaker than the 101.7 forecast. One of the most interesting revelations this morning was that the forward-looking IFO Expectations index slipped from 98.7 in November, past the 98.3 forecast, and slumped at 97.3. The German IFO Current Assessment index also took a tumble to 104.7 from the previous 105.4 reading.

IFO President Clemens Fuest commented on Germany’s apparent economic cooling, and the lowest business sentiment in two years, saying:

‘We think it’s a permanent slowdown. Not a downturn, we still expect growth next year.’

Eyes Turn to Federal Reserve Rate Meeting for US Dollar Exchange Rate Direction

Meanwhile, in the US, expectations suggest the US will experience another rate hike tomorrow when the Federal Reserve meets to discuss monetary policy. Last night US President Donald Trump renewed his attack on the Federal Reserve and Chief Jerome Powell, after recent outbursts on the central bank’s actions–something which is unusual for a US President to get involved in so as not to undermine the autonomy of the bank.

Trump stated in a tweet:

‘It is incredible that with a very strong Dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!’

The Pound to Euro (GBP/EUR) exchange rate is trading at 1.1144. The Pound to US Dollar (GBP/USD) exchange rate is trading at 1.2704.

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