11.01.2019: EUR and GBP extending gains despite headwinds
The European assets are extending steady gains versus the US dollar.
The euro/dollar pair settled up at 1.1520 following an upward correction from 1.1500. The euro briefly dipped yesterday after the ECB had released the minutes of the latest policy meeting.
At the policy meeting in December, the ECB decided to complete its QE program. Market participants were to eager to find out forward guidance in the minutes. However, traders did not discover any policy update. The ECB officials again warned that geopolitical risks and a looming Brexit pose a threat to the eurozone’s economy.
The pound sterling has been highly sensitive to the Brexit issue for a long time. So, the sterling cannot benefit in full from the broad-based weakness of the US dollar. The British Parliament is due to vote on the Brexit deal, agreed earlier between Theresa May and Brussels. The Brexit scenario suggested by Theresa May sparks disapproval in the government, thus generating uncertainty in the market.
The pound/dollar pair opened the European trade lower at near 1.2720. However, the weaker US dollar encourages further growth of the British currency.
UK gross domestic product expanded 0.2% in November from a 0.1% uptick in October. The figure surpassed the median forecast. It was the only upbeat reading to support the pound sterling. Growth in the UK economy continued to slow in the three months to November.
Industrial production dropped by 0.4% in November from the previous month, while economists had expected a 0.35 increase. This proves instability in the UK economic conditions before the actual divorce from the EU. Traders are scared amid the likelihood of a no-deal Brexit if the Parliament votes against Theresa May’s deal.
Meanwhile, the pound sterling is taking advantage of its soft American counterpart. As a result, the euro and sterling are set to finish the week in the green.
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