The pound has fallen lower against the Euro this week although there have been some signs of improvement especially after the comments from Michel Barnier on Wednesday which saw a spike for the GBP EUR pair of around 1% and creating a good short term spike for those looking to buy Euros. In the grand scheme of things however not much has changed. There is still some way to go in the Brexit negotiations which should see the pound remain at the lower levels until new direction is offered.
With both the EU and UK preparing for a no deal Brexit then there is likely to be considerable pressure on sterling exchange rates. There is a meeting marked for 13th September for cabinet ministers of which its sole purpose will be to discuss plan for a no deal Brexit.
Eurozone data has been slightly more positive after German and Spanish inflation numbers moved higher towards the target level of 2%. Inflation has remained stubbornly slow in the Eurozone and an increase is likely to give the European Central Bank some more flexibility in its approach to eventually raising interest rates.
The Italian debt crisis meanwhile is still very much in the background after it was reported that Italy has approached the European Central Bank for a version of Quantitative Easing to help stabilise its economy. As the central bank continues to taper its asset purchasing programme it has seen borrowing costs rise in Italy whilst investors dump Italian debt. There is likely to be more from this story as other economic and political shocks hit the system creating more uncertainty for Euro exchange rate.
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