On September 02, the pound witnessed an increased sell-off due to which the EUR/GBP pair touched 0.89, its lowest point of the month. However, in the following days, the pair rose substantially and peaked at 0.93 on September 12, gaining about 4.4% in ten days. The pound recouped some of the losses, and the pair traded at 0.91 on September 18.
Factors affecting the British Pound:
During the month, the British pound remained under pressure owing to disappointing Brexit developments. The British House of Commons passed a controversial Internal Markets Bill, which will empower the British government to override parts of the withdrawal treaty, a move that could lead to a no-deal in the Brexit negotiations before the December 31 Brexit transition deadline.
The UK unemployment rate for three months from May to July increased to 4.1%, compared with 3.9% in the previous three months from February to March. With the government’s furlough scheme ending on October 31, the unemployment figures will rise further, a potential sign of a weaker economy and lower appetite for jobs, which might keep a lid on the sterling.
The surprising inflation data, however, supported the sterling as the UK Consumer Price Index for August dropped to 0.2% from 1% in July, a five-year low. This provided the sterling much-needed support, allowing the pound to pare some losses.
Factors affecting the Euro:
The EU’s industrial production rose by 4.1% month-over-month in July, beating the expectations. Portugal, Spain, and Ireland were the main contributors to the growth, thanks to the gradual easing of lockdown measures and the reopening of the economies. However, the figures are nowhere close to the pre-pandemic levels, but nevertheless, strengthened the Euro against the pound.
The stalemate in Brexit negotiations following the introduction of the controversial Internal Markets bill will check the sterling advances. However, the following scheduled events will shape the future direction of the pair:
● The EU Trade Balance report.
● European Central Bank’s member speech
● Bank of England interest rate decision
● Eurozone inflation data.