ExchangeRates.org.uk - The Euro faced selling pressure at the start of the week as a rallying US Dollar piled pressure on the single currency, due to EUR’s negative correlation with USD.The American Dollar climbed in the wake of comments from President-Elect Donald Trump, who said he would slap Brics countries with a 100% tariff if they create a new currency to rival the US Dollar as the de factor global reserve currency.
In addition, political instability in France put pressure on the Euro.
The French Prime Minister, Michel Barnier, faced the possibility a no-confidence vote after his austerity budget angered opposition parties.
His minority government relies on tenuous support in a fragmented National Assembly.
The budget, aimed at reducing France's deficit, has angered both left- and right-wing parties, increasing the risk of a no-confidence vote and underlining the divided nature of the French parliament.
These political tensions in the Eurozone’s second-largest economy weighed on the Euro on Monday.
Meanwhile, the Pound (GBP) enjoyed support on Monday as a surprising acceleration in house price growth boosted the currency.
House price growth rose to a two-year high in November, with the pace of growth surprising markets.
The data is an indication that despite high interest rates and a squeeze on household budgets, strong income growth is keeping demand alive.
GBP/EUR Exchange Rate Forecast: Services PMIs to Pressure Both Currencies?
Looking forward, the Pound Euro exchange rate could be muted on Tuesday amid a lack of UK and Eurozone economic data.
Wednesday may be more eventful, with the final services PMIs for both GBP and EUR due out.
With Eurozone services activity expected to contract and UK activity set to stall, GBP/EUR could rise, although both currencies could face headwinds elsewhere.
A speech from Bank of England (BoE) Governor Andrew Bailey could impact the Pound.
If Bailey indicates that an interest rate cut this month is unlikely, Sterling could strengthen.
The President of the European Central Bank (ECB), Christine Lagarde, is also due to speak on Wednesday.
Any dovish comments could weigh on the Euro.
This content was originally published on ExchangeRates.org.uk