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Brexit Hopes Keep Pound Sterling to Euro Exchange Rate Higher despite Uncertainties

Pound to Euro Exchange Rate Recovers Following Thursday Slide

As investors continue to digest yesterday’s European Central Bank (ECB) policy decision, the Pound Sterling to Euro (GBP/EUR) exchange rate has rebounded from its overnight lows. Market demand for the Euro (EUR) is limited.

Since GBP/EUR climbed around a cent at the beginning of the week, the pair has sustained most of those gains.

Until yesterday, GBP/EUR was trending near the key level of 1.1200. However, after the ECB decision the Euro strengthened.

At the time of writing on Friday, GBP/EUR had recovered some of its overnight losses and trended near the level of 1.1176.

Brexit hopes continue to support Sterling, despite the broad political uncertainty in Britain lately.

Pound (GBP) Exchange Rates Find Support in Lasting Brexit Hopes

The Pound (GBP) looks set to round out the week with a slightly more optimistic outlook, following this week’s Brexit developments.

While the UK government continues to indicate that it has no intention of delaying the Brexit process beyond the end of October, hopes that a no-deal Brexit can be averted have risen as well.

Investors are optimistic that a newly passed law to avoid a no-deal Brexit will be upheld. Comments from Commons Speaker John Bercow, vowing to make sure the government follows the law, gave Sterling further support today.

Sterling has also found support in speculation that MPs are looking to find a cross-party consensus on a softer Brexit plan, to make sure that a no-deal Brexit does not become reality.

Euro (EUR) Exchange Rates Remain Sturdy as ECB News Digested

While the Euro (EUR) shed some ground against a recovering Pound this morning, the shared currency remained fairly appealing overall and was advancing against many other rivals.

Yesterday’s European Central Bank (ECB) decision saw the bank introduce a comprehensive easing package to stimulate the ailing Eurozone economy.

However the stimulus was not as aggressive as some economists predicted it would be, and as a result the Euro quickly recovered from a brief dip and continued to advance.

ECB President Mario Draghi came under criticism for the package, which was seen as his last big announcement before his term ends after just one more policy decision next month.

Some economists, including some on the ECB’s own governing council, argued that eased monetary policy was reaching the limits of its effectiveness.

According to Robert Holzmann, the Governor of Austria’s National Bank and ECB member:

‘Essentially it was the question about how effective will a new monetary easing be.’

Pound to Euro (GBP/EUR) Exchange Rate Remains Focused on Brexit and Central Bank Speculations

There will be more notable data published next week, but the Pound and Euro outlooks will be especially driven by news that influences Brexit and central bank speculation.

While UK Parliament looks likely to remain prorogued for now, developments over domestic politics and Brexit will remain the focus for Pound investors.

If the government is perceived as less likely to seek a no-deal Brexit, the Pound may be in for further gains. Sterling could also find further support if next week’s upcoming UK inflation and retail sales results impress investors.

Next week will also see the Bank of England (BoE) hold its September policy decision. UK data could influence BoE bets, but ultimately the bank’s tone on its Brexit outlook will be the most influential economic news of the week.

European Central Bank (ECB) bets and speculation will likely remain in focus as well.

If ZEW’s Eurozone economic sentiment data or Eurozone inflation stats disappoint investors throughout the week, the Pound to Euro (GBP/EUR) exchange rate will have a better chance of advancing.