The GBP EUR exchange rate slumped by over a cent to a two-month low this morning following comments made by Prime Minister Theresa May over the weekend.
Pound Euro (GBP EUR) Tumbles As May Hints at ‘Hard Brexit’
The Pound Euro (GBP EUR) exchange rate plummeted on Monday morning as investors reacted negatively to Theresa May’s comments that she is not interested in keeping ‘bits of EU membership’ in an interview on Sunday.
Markets have taken this as a sign that the UK government will not seek to retain access to the single market post-‘Brexit’ especially following her remarks that controlling EU immigration would be her first priority in ‘Brexit’ negotiations, which indicates that Britain is likely headed for a ‘hard Brexit’.
Traders fear what impact leaving the single market will have on the British economy as UK firms face the prospect of paying tariffs on products exported to EU, while London could potentially lose its status as the financial centre of Europe.
Euro Bolstered by German Trade Balance
The Euro was further strengthened this morning by the release of Germany’s latest Trade Balance data, which reported that Germany’s trade surplus rose to €22.6bn November, rallying from a drop to €19.4bn the previous month and alleviating fears of slowdown in Europe’s largest economy.
The single currency was also bolstered by the Eurozone’s latest employment figures, as the unemployment rate held steady at 9.8% in November, a seven-year low and a notable improvement from 10.5% the previous year.
GBP EUR Forecast: UK Production Data May Strengthen Pound on Wednesday
The GBP EUR exchange rate may rally mid-week as the UK releases its latest production figures for the Construction, Manufacturing and Industrial sectors, with growth expected across the board after last week’s impressive PMI readings.
Meanwhile, the Euro may struggle to advance in the first half of the week due to a lack of significant data and will rely upon Eurozone sentiment until Thursday, when the latest Industrial Production figures are released.
Looking further ahead, the Pound may find itself drifting closer to parity with the Euro as Sterling sentiment likely sours in the run up to March, when the UK government is expected to trigger Article 50 and begin formal ‘Brexit’ negotiations.
Current Interbank Exchange Rates
At the time of writing the GBP EUR exchange rate was trending around 1.15 and the EUR GBP exchange rate was trending around 0.86.