UK’s euro clearing access to EU requires careful analysis post Brexit: ECB official


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analysis euro uk

The fresh Purchasing Managers’ Index data for December showed private sector activity in the euro area shrank at the slowest pace in four months, which could suggest the impending recession in the EU could be less severe than previously anticipated. The ECB is widely expected axitrader forex broker review to continue its hawkish monetary stance in 2023. Fitch Ratings forecast the bank to raise its main refinancing rate to 4% by June 2023. The GBP/EUR pair represents how many euros – the quote currency – are needed to buy one British pound – the base currency.

“We benefit from a strong EU, that’s what we need for our economy, we’d prefer to see the UK back as a partner of some sort, but if the UK forces us to choose then we’ll choose the EU every time.” They are optimistic that Sunak argued against the triggering of Article 16 several months ago, pointing out the peril of risking the suspension of the EU-UK Trade and Cooperation agreement. The same report estimated that investment is 13.7 per cent lower, and goods trade, is 13.6 per cent lower in the final quarter of 2021. Former UK finance minister Rishi Sunak is the best hope for any negotiated solution to the Northern Ireland Protocol, multiple EU sources have told Euronews.


Our forecast for US 10-year Treasury yields at 2.75% year-end will argue for USD/JPY to be trading at 130 or lower. “While the further fall in business activity in December signals a strong possibility of recession, the survey also hints that any downturn will be milder than thought likely a few months ago. The data for the fourth quarter are consistent with GDP contracting at a quarterly rate of just less than 0.2%, and forward-looking indicators are currently boding well for the rate of decline to ease further in the first quarter. The euro had a turbulent 2022, as investors appear rush for safety on the prospect of a severe economic recession in Europe amid the ongoing war in Ukraine, rising borrowing costs and stubbornly high inflation. More than 2,000 leading companies and government institutions rely on our services for business-critical forecasting and scenario activities.

Will GBP get stronger in 2023?

The OECD has forecast the UK economy to shrink by 0.4% in 2023. In contrast, the US is expected to grow in 2023 by 1.8%. Based on that, you would expect the GBP/USD rate to remain weak.

“The government’s programme is a last-resort financing option for companies that would otherwise be threatened with insolvency,” Finland’s prime minister Sanna Marin told a news conference. Economists expect the region’s economy to contract by 0.4% in the fourth quarter of 2022, and by 0.3% in the first quarter of 2023, according to a consensus forecast from FactSet and quoted by Dow Jones’s Xavier Fontdegloria. Since then, as a result of the Russian invasion of Ukraine in February and Western sanctions on Moscow, food, fuel and energy prices have surged. CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.

What is your sentiment on EUR/GBP?

For the EU as a whole, including those countries not in the euro, the growth forecast was raised to 3.3% in 2022 (up from 2.7% in June) but revised down to 0.3% in 2023. Euro area inflation, as measured by consumer prices, was expected to fall to 9.2% year-over-year in December – down from 10% in November. Energy prices have been a major contributor to the rise in inflation – energy is expected to have the highest annual rate in December (25.7%, down from 34.9% in November), followed by food, alcohol and tobacco (13.8%, against 13.6% in October). The pair rebounded to $1.036 by 11 August, but the growth would be short-lived. The currency pair slid down sharply in the space of a week, breaking parity once more on 22 August. From here, the pair attempted to rebound, rising to $1.0650 at the beginning of June, before falling again and breaking euro parity with the US dollar on 13 July, marking a 20-year low.

analysis euro uk

“What Brexit has not done by itself, Brexit coupled with Covid and high inflation have succeeded in doing. The U.K. economy is crushed.” The country has also been battling trade disruptions due to Brexit and Covid-related bottlenecks. “I find it hard to see where it can go in 4xcube forex broker overview terms of a more structured approach, after Liz Truss came in we had hope, but look how that has turned out,” a senior diplomat told Euronews. But there is no real, discernable faith that relations are bound to improve any time soon, regardless of the positions of the leaders.

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In a research note Monday, Saxo Bank’s head of macro analysis, Christopher Dembik, said the U.K. “What is key for me is that there is clear analysis for the stability implications, both in regards to relocation and non-relocation, and to balance this with a clear strategy and a clearly communicated strategy,” Loeber said. There was a need to look closely at longer term implications by taking into account the ability of EU firms to access global markets without undue costs and the role of sovereignty in EU markets, Loeber said. The LSE dominates euro derivatives clearing and EU policymakers have called for the activity to be relocated to the bloc given that Britain will no longer have to comply with EU rules after Dec. 31 when a post-Brexit transition period ends. Sterling, already hurt by a strong dollar, fell to record lows, creating another headache for the Bank of England which is has accelerated the pace of its interest rate increases in a bid to tackle an inflation rate running at nearly 10%. The UK’s latest data for the three months to September showed 3.6% unemployment, which is relatively low compared to some other advanced economies.

Will the pound ever go back up?

The short answer is possibly yes. According to investment bank Morgan Stanley the British pound could be one of 2023's best-performing financial assets. However, 2022 was a bad year and 2023 is forecast to be as bleak, but positive developments and surprises could provide a healthy boost to Sterling.

“We expect the UK to be first to enter a recession, and the last one to pull out,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. Investors are aware of the fact that extreme policy tightening measures taken by Federal Reserve chair Jerome Powell and his teammates have restricted firms to bank upon borrowings. Rising interest obligations have resulted in lower operating margins for firms. Also, weaker demand projections have forced the firms to avoid operating at full capacity. Investors will get more clarity about the scale of economic activities after the release of the US GDP data. Considering the fact that Fed chair Jerome Powell has tightened the monetary policy on an extreme note in CY2022, the street is expecting a contraction in the scale of economic activities.

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“They faced an economy of suppressed wages, no housing prospects, two years of socializing lost to lockdown, obscene energy bills and rent and now a lengthy recession. This will lead to more poverty and despair.” “Outside of the jobs markets, there are signs that some of the key inflation drivers may be starting to ease,” Dembik said. The one solace, according to the Danish investment bank, is that the Bank of England’s expected interest rate hike in September — which would be its seventh in a row — could be the last. The only factor missing from a characterization as an EM country, Dembik said, is a currency crisis, with the British pound holding firm.

Will EUR GBP go up or down?

EUR/GBP Mid-Day Outlook

Intraday bias is back on the upside for retesting 0.8896 resistance. Firm break there will resume whole rise from 0.8896 to 61.8% projection of 0.8545 to 0.8896 from 0.8720 at 0.8937. On the downside, below 0.8765 minor support will turn intraday bias neutral again.

NatWest Markets also suggested Friday’s announcement would do little to tame gilt yields. The UK is roughly middle of the pack if you compare productivity growth to other major economies from 2011 to 2019. It’s a form of growth that does not drive up inflation, and therefore a top aim for policymakers. Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022.

Analysis: Battered UK markets need more than policy U-Turn before confidence returns

Oxford Economics is a leader in global economic forecasting and econometric analysis. Our rigorous economic forecasts are powered by the world’s leading fully-integrated global economic model. Our 300 full-time economists and analysts help our clients to track, analyse, and model country, industry, and city-level trends and understand the implications of the economic outlook for their decision-making. Our rigorous economic forecasts are powered by the world’s only fully-integrated global economic model. Our 300 full-time economists help our clients to track, analyse, and model country, industry, and urban trends and understand the economic outlook.

analysis euro uk

“The manufacturing downturn has moderated especially markedly in December, led by Germany and linked to a combination of improving supply conditions and reduced fears of energy constraints. The service sector malaise has also calmed, in part driven by signs of reduced fears over the cost of living squeeze and, in the financial service sector, reduced concerns over the tightening of financial conditions. CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.

And central banks tightening liquidity conditions through higher policy rates and shrinking balance sheets will only exacerbate the liquidity problems already present in financial markets. Macroeconomic indicators, including GDP, inflation, interest rates, services and manufacturing activity and unemployment, drive the currency markets, as they affect a country’s attractiveness to investors and, in turn, demand for its currency. Different trading strategies will suit different investment goals with short or long-term focus.

Focus also turned to growing political instability with the fourth finance minister in as many months appointed in a country grappling with a cost-of-living crisis, and some questioned how long Truss herself could stay in office. The pound and British government bond prices rose on Thursday and Friday in anticipation of the policy shift, but they retreated after Truss gave a short news conference on Friday, which underwhelmed analysts. LONDON, Oct British Prime Minister Liz Truss and new finance minister Jeremy Hunt will have to do a lot more than Friday’s U-turn on corporation tax to restore Britain’s credibility with financial markets after three bruising weeks.

Euro forecast: Will EUR continue rising?

Each country file clearly indicates when the information was completed, so readers can be clear on the currency of the information provided. Economy will enter its longest recession since the global financial crisis in the fourth quarter, leading GDP 2.1% lower. The diplomats and officials Euronews spoke with wished to speak anonymously so as to not create more tension with Britain. Oil prices rose more than 1% on Thursday on expectations that global demand will strengthen as top oil importer China reopens its economy and on positive U.S. economic data. Nomura said sterling’s decline was unlikely to slow until economic growth rebounds. The pound was trading at around $1.1191 and is already down 17% against the dollar this year.

The economic data is expected to escalate to 5.3% from the prior release of 4.7%. Also, the Durable Goods Orders data will be keenly watched, which is seen at 2.5% vs. -2.1% in the prior release. This pair represents a cross between the two largest economies in Europe, the Euro Zone and the United Kingdom.

The pair is greatly less volatile than other Euro or Pound based crosses because of the economic closeness and interdependence between the two. Changes in monetary policy between the Bank of England and the European Central Bank can make this pair extremely sensitive. The three key rates were then further raised by 75bps on 8 September and 27 October. The ECB raised the three rates by 50bps during its last monetary policy meeting of 2022 on 15 December, marking a fourth rate increase. On 21 July, the ECB raisedall three key interest rates by 50bps for the first time since 2011, exceeding market expectations and breaking its own guidance for a 25bps move. At the June ECB meeting, policymakers pre-committed to a rate hike – the first in over a decade – as central bank president Christine Lagarde, as well as the institution’s policymakers, looked to fight inflation.

The CPRA work has been developed to provide a form of individualised country information. This provides countries with a reflection on their current policy frameworks for inclusive education. It also offers them recommendations for priorities to be addressed that are specific to their country.

  • Finland has also said it will stabilise the power market with a €10bn ($9.95bn) programme.
  • Macroeconomic indicators, including GDP, inflation, interest rates, services and manufacturing activity and unemployment, drive the currency markets, as they affect a country’s attractiveness to investors and, in turn, demand for its currency.
  • Focus also turned to growing political instability with the fourth finance minister in as many months appointed in a country grappling with a cost-of-living crisis, and some questioned how long Truss herself could stay in office.
  • As of 17 January 2023, the EUR/USD exchange rate was at 1.0822, up 0.25% year-to-date and almost 10% in the last three months.
  • The gas stoppage “is another blow to the European economic outlook, which has left the euro weak in the near term due to governance-related risks”, Piet Haines Christiansen, chief strategist at Danske Bank in Copenhagen, told Bloomberg on 4 September.

Inflation was already high at the start of the year, owing to Covid-19 supply chain disruptions and mismatched supply and demand as nations came out of lockdowns. The euro’s steady decline through most of 2022 came amid growing concerns over the health of the eurozone economy, as inflation rose to a record high and growth slowed. The GBP/EUR currency pair started 2023 on a strong foot amid reports of strong UK labour market and upbeat corporate earnings data, which may mean more aggressive interest rate hikes by the Bank of England .

What is the best time to trade GBP/EUR?

We anticipate and quickly respond to emerging trends with timely, incisive research. Our team is here to support you by answering your questions via email, telephone and video calls. All clients have access to our regular schedule of conferences, roundtables, webinars, and podcasts discussing the latest economic developments and prospects. Our economic consultants and thought leadership specialists are experts at applying advanced economic tools to provide valuable insights into today’s most pressing business, financial, and policy issues. Oxford Economics is the world’s foremost independent economic advisory firm. We enable intelligent and responsible decision-making through the provision of timely, data-driven economic and business insights and solutions our clients trust.

The latest figures show inflation reached a 41-year high in the year to October of 11.1%, if this is harmonised – to try to compare like-for-like – inflation was 10.6% for the eurozone. France is a notable outlier, with some particularly large energy market interventions, with 7.1% inflation in October according to Eurostat. He’s considering pencilling in a double dip recession of back-to-back winter slumps in the eurozone due to the severe shock of higher imported energy costs.

His term as a member of the Board of Governors will expire January 31, 2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. Following the better-than-expected GDP and Durable what is fx choice Goods Orders data from the US, the benchmark 10-year US Treasury bond yield is up nearly 2% on the day above 3.5%, forcing XAU/USD to stay on the back foot. To sum up, EUR/USD bulls are likely to take a breather as traders braces for the key data/events. We were able to witness a pump earlier in the morning and we are expecting some more bullish action once a mild correctional move is completed.

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