EUR GBP Looks to UK GDP as Article 16 Looms

The EUR GBP exchange rate was flat on Wednesday and is now waiting for Thursday’s economic data. The pound has trade balance and GDP figures released today. European Union officials are also warning of tough action if the UK triggers article 16.

The EUR v GBP is trading at 0.8555 after the recent bounce in the euro from yearly lows.

EU agrees on robust action against UK with article 16

European Union governments have agreed on a need for “robust” action against Britain if the government follows through with its threat to trigger article 16.

Britain and the European Commission have been in talks over the Northern Ireland protocol in the last month, with checks required for goods entering from Britain.

The European Commission Vice-President Maros Sefcovic told EU ambassadors in Brussels that talks with Britain were not going well but should continue.

The Commission offered Britain a package of measures to ease the transit of goods to Northern Ireland, but it stopped short of the overhaul that the government is seeking. Britain has threatened to trigger emergency provisions under Article 16.

“The EU is preparing for the triggering of Article 16 by the UK. There is consensus among EU member states that such an arbitrary and unjustified move by the UK will be met with a clear European response,” according to an EU diplomat.

British Brexit Minister David Frost said that Brussels should stay calm and avoid “massive and disproportionate” retaliation.

UK GDP figures set to slow, BoE ‘hasn’t a clue’

The UK will see the latest 3-month GDP figures released for the three months into September.

Growth for the period is forecast to slow to 1.5% from 2.9% but the July and August months will buffer the reading from the more recent problems in the energy market and petrol forecourts.

Meanwhile the Bank of England has expressed its remorse at higher inflation.

“I’m very sorry that’s happening,” the bank’s governor told the BBC.

“Inflation is clearly something that bites on people’s household income. I’m sure they’re already feeling that in terms of prices that are going up.”

This has helped push UK’s “Misery Index” to its highest in a decade…

“Putting interest rates up, I’m afraid, isn’t going to get us more gas,” Mr Bailey said.

But Danny Blanchflower, a former member of the MPC, warned that trusting what The Bank says may be a mistake:

“We have no historical precedent for what’s happened,” he said.

“We’ve never seen a shock of this kind and the big thing we are seeing at the moment is the furlough scheme is coming off, there is going to be an increase in taxes on National Insurance and universal credit was just cut.

“So, the central bank really hasn’t a lot of clue what is going on.”

He concluded: “This is a really big uncertain world and everybody should tread cautiously. I’m afraid I have to say… you have to take what the governor of the Bank of England and the Monetary Policy Committee said with a very large pinch of salt.”

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