Pound to Euro Exchange Rate Pressured Near Yearly Lows on Persistent Brexit Jitters
Sterling (GBP) can’t seem to catch a break from market concerns about the possibility of a ‘no deal’ Brexit, as comments from UK Prime Minister Theresa May knocked the Pound Sterling to Euro (GBP/EUR) exchange rate even lower on Tuesday.
After spending most of last week tumbling from the week’s opening levels of 1.1136 to 1.1048, GBP/EUR slipped again when UK markets opened on Tuesday, following Britain’s Monday bank holiday.
On Tuesday morning, GBP/EUR touched on a low of 1.1023. This was the worst GBP/EUR level since September 2017 – almost a year. At the time of writing, GBP/EUR trended in the region of 1.1033.
Weakness in the Pound made it easier for the Euro (EUR) to advance, but the shared currency has also benefitted from this week’s data so far, as well as weakness in its rival the US Dollar (USD).
Pound (GBP) Exchange Rates Weighed as ‘No Deal’ Brexit Fears Persist
Another week, another set of signs that the Pound may not see a notable rise in demand any time soon. Once again, concerns that the UK may be faced with a worst-case scenario ‘no deal’ Brexit kept the British currency unappealing.
After relatively limp movement during Monday’s bank holiday, investors sold the Pound on Tuesday in reaction to the latest Brexit comments from high-ranking officials.
Most notably, UK Prime Minister Theresa May appeared to remain optimistic even in the face of a ‘no deal’ Brexit, saying:
‘…it would not be a walk in the park, but it wouldn’t be the end of the world,
I’ve said right from the beginning that no deal is better than a bad deal.’
May cited World Trade Organisation (WTO) Chief Roberto Azevedo in her comments, saying she agreed with him that even if a deal wasn’t met it wouldn’t entirely stop UK-EU trade.
However, her optimism that a ‘no deal’ Brexit could work caused more concern than calm for investors.
As well as May’s comments, Pound investors were anxious about comments from French Prime Minister Edouard Philippe. He has reportedly asked for contingencies to be made to deal with the possibility of a ‘no deal’ Brexit.
Euro (EUR) Exchange Rates Supported by Eurozone Data and Rival Movements
While the Pound to Euro (GBP/EUR) exchange rate would likely have held above its 2018 lows if not for Pound weakness, the Euro was able to more easily capitalise thanks to other factors.
Monday saw the publication of Ifo’s German business confidence data from August, which actually beat forecasts in all notable prints.
The data offset concerns that Germany’s economy would be significantly impacted by US trade protectionism and showed that businesses were actually more resilient than expected.
France’s August consumer confidence survey data met expectations on Tuesday, remaining at 97 as expected.
As well as domestic data, the Euro has benefitted from weakness in its biggest rival, the US Dollar (USD).
Investors have been selling the US Dollar over the past week on Federal Reserve uncertainties, as well as weaker demand for ‘safe haven’ currencies. As the Euro often sees a negative correlation to the US Dollar, the Euro climbed as the US Dollar weakened.
Pound to Euro (GBP/EUR) Forecast: Eurozone Confidence and Inflation Data Ahead
As this week’s UK economic calendar will be relatively quiet until Friday, the Pound to Euro (GBP/EUR) exchange rate is more likely to be driven by potential Brexit developments, as well as the Euro’s strength.
‘No deal’ Brexit jitters continue to be the primary cause of weakness in Sterling, and unless they lighten notably the Pound is unlikely to see much of a recovery any time soon.
Any signs that the UK and EU are getting closer to reaching a proper post-Brexit deal would improve Sterling support, but unless that happens GBP/EUR may flounder near its recent lows – if Eurozone data impresses that is.
Wednesday will see the publication Germany’s September consumer confidence data from GfK, with the Eurozone’s overall August confidence stats due for publication on Thursday.
Eurozone inflation will also take focus towards the end of the week, as German Consumer Price Index (CPI) projections for August will come in on Thursday, with the Eurozone’s projections following on Friday.
If these stats impress investors, GBP/EUR may remain near yearly lows. Weak Eurozone data could make it easier for GBP/EUR to rebound from its worst levels though.
Of course, the US Dollar’s (USD) strength will continue to play a key role in the strength of the Euro and the direction of the Pound to Euro (GBP/EUR) exchange rate outlook too.
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