Pound to Euro Exchange Rate Continues its Descent Ahead of UK Parliament’s Brexit Vote
The date of UK Parliament’s vote on Brexit is fast approaching, and when markets opened on Monday the Pound to Euro (GBP/EUR) exchange rate saw fresh losses amid the significant uncertainties in the short to long term Pound (GBP) outlook.
Last week, despite some weak Eurozone data, GBP/EUR spent most of the week tumbling after opening the week at the level of 1.1265. The pair lost almost a cent throughout the week and closed at the level of 1.1175.
This week so far, Brexit uncertainties have driven GBP/EUR even lower and the pair trended near a two-month-low of 1.1134 at the time of writing.
Uncertainty about the future of the Brexit process and the UK economy is running high, as the many potential outcomes for Tuesday’s upcoming UK Parliament Brexit vote could set the path for the nation’s future.
As a result of the broad volatility and uncertainty dominating Sterling, it has been weaker than the Euro (EUR) despite some disappointing Eurozone data last week.
Pound (GBP) Exchange Rates Lose Appeal with Future of Brexit Process in the Balance
Investors have little reason to buy the Pound this week, at least not ahead of Tuesday’s major UK Parliament vote on the future of UK Prime Minister Theresa May’s Brexit deal.
The deal, which UK Prime Minister May reached after a year and a half of negotiations between her government and the EU, will face UK Parliament on the 11th of December and analysts believe the chances of it passing are low.
If the deal does not pass UK Parliament, it will leave the state of Brexit at a crossroads filled with significant uncertainties.
The potential outcomes of the deal’s likely blocking include worsening the chances of a ‘no-deal Brexit’, or UK political instabilities including a potential leadership challenge within the UK government or even a general election.
News that the EU’s top court had confirmed that Britain would be able to unilaterally cancel Article 50 and the Brexit process did little to calm market jitters on Monday.
Euro (EUR) Exchange Rates Benefit from Weakness in Rivals
Despite some underwhelming Eurozone data last week, the Euro has been able to keep climbing thanks to broad weakness in its biggest rivals, the Pound and the US Dollar (USD).
The Euro has a negative correlation with the US Dollar (USD), so the US Dollar’s losses over the past week on fears of a more dovish Federal Reserve and slowing US growth left the Euro stronger.
Of course, the Euro has been able to more easily climb against Sterling as investors sell the Pound on broad Brexit uncertainties.
This has been despite some weak Eurozone data over the past week, including some slightly weaker than forecast Eurozone growth projections on Friday.
News that Eurozone growth is projected to have been slower in Q3 than previously expected worsened concerns that the Eurozone’s economic activity was slowing into 2019, but the shared currency has climbed regardless.
Pound to Euro (GBP/EUR) Exchange Rate Investors Focused on UK Parliament Brexit Vote
Some notable ecostats, including UK job market figures, as well as German and Eurozone economic sentiment figures from ZEW, will be published on Tuesday and would be typically influential prints.
However, Tuesday the 11th of December is the date on which UK Parliament will hold its hotly anticipated vote on the future of UK Prime Minister Theresa May’s Brexit deal.
The deal is expected to be blocked, but the size of the opposition to May’s deal could influence ‘no-deal Brexit’ fears and the Pound’s reaction.
If May’s deal loses by a significant number of votes, hopes that she will eventually be able to succeed in a second vote will fade and ‘no-deal Brexit’ fears will worsen.
The potential outcomes to the vote will be closely watched by markets. For example, a UK leadership challenge or general election could cause further Brexit uncertainties and Pound losses.
However, if the perceived chances of a second referendum rise, this could give the Pound to Euro (GBP/EUR) exchange rate some support.
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