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Euro Pound Exchange Rate Mixed, EUR Sentiment Weakens Further on Brexit Fears

Euro Currency Forecast
  • Euro Pound Exchange Rate Fluctuates – Pound attempts recovery on Tuesday
  • MEPs Speak with UK Government – EU maintains no negotiations before Article 50
  • Pound Remains Weak – UK ecopolitical landscape in crisis
  • Forecast: Will Sterling Recover? – Central bank comments may influence movement

The Euro Pound exchange rate (EUR/GBP) weakened slightly on Tuesday after its large gains on Friday and Monday. Market sentiment throughout Europe remained weak, but the Pound was still largely unfavoured compared to the Euro despite a small recovery attempted on Tuesday.

At the time of writing, EUR/GBP trended in the region of 0.8315, slipping slightly from its Monday high of 0.8467. The pair trended in the region of 0.7690 at this time last week, a time when markets had been pricing in a ‘Remain’ win.

Euro (EUR) Sentiment Dampened as Markets Fear Eurozone Fallout

While the UK is set to be the first nation to ever leave the European Union in its current form, Euroscepticism across the bloc has been on the rise since news that Britain would Brexit from the EU broke last Friday.

Marine Le Pen, Leader of the Front National (a far-right French party) told MEPs on Tuesday that Britain’s vote was a success of history, reflecting her desire for France to follow and gain independence from the EU. Euroscepticism in France has been on the rise in recent years.

If countries using the Euro were inspired by the Brexit to leave the European Union, the Eurozone could suffer considerably and the Euro as a currency may enter crisis. This is a long-term possibility, but one that investors are already concerned about.

Investors also eagerly await news from the European Central Bank (ECB). ECB President Draghi has implied in the past that the ECB is prepared to deal out damage control measures such as easing and stimulus in the event of a ‘Brexit’, and the possibility of this has weighed on the Euro’s appeal.

When Draghi spoke at Sintra on Tuesday morning, he chose to not comment in depth on the Brexit. He expressed sadness at the vote and maintained his narrative that EU leaders had to co-operate with banks.

Pound Sterling (GBP) Attempts Recovery on Tuesday

The Pound regained some strength against many of its rivals on Tuesday as investors bought it from its lowest levels, after two sessions of sheer bearishness on Friday and Monday.

Sterling gained most against the rivals it had lost most considerably against – that is, ‘safe-haven’ currencies like the US Dollar and Japanese Yen.

However, it failed to gain considerably on the Euro as the Euro also recovered against the same rivals for the same reasons.

Uncertainty in Britain remained high, and Sterling remained easily pressured. Most recent developments in Britain’s major political parties include the news that Prime Minister David Cameron’s successor could be named as soon as the 2nd of September.

Meanwhile, the Labour party remains in crisis as a large number of front-bench MPs resign in protest over Jeremy Corbyn’s leadership.

British MEPs spoke in Brussels on Tuesday morning. While UKIP leader Nigel Farage expressed glee in the ‘Leave’ party’s win, MEPs from Scotland and Northern Ireland expressed desire for their ‘Remain’ electorates to be helped in some way by the EU.

Pound Sterling Currency Forecast

Euro to Pound Exchange Rate Forecast: Will Draghi Speak on Brexit?

The Pound attempted to recover against the Euro on Tuesday with poor results. Its lows are likely to continue in both the short and long-term as it feels ongoing pressure from the economic and political instabilities in Britain.

With most British MPs meeting behind a consensus that Article 50 (the trigger needed to formally begin the Brexit process) should not be rushed, investors are likely to heavily speculate when it will be activated in the coming days and weeks. If it is activated, the Euro will likely gain on the Pound as Sterling sentiment takes another hit.

Some analysts have previously predicted that the Euro and Pound could reach parity, but others argue that this is unlikely as the Euro has also been affected negatively, slightly muting GBP/EUR and EUR/GBP movement.

Markets around the world are currently eagerly awaiting news from central banks. It is widely speculated that many of the world’s major central banks will either cut back on recovery measures or even introduce easing measures in order to stave off economic damage from the vote.

At the time of writing, the Euro Pound exchange rate (EUR/GBP) trended in the region of 0.8320, while the Pound to Euro exchange rate (GBP/EUR) traded at around 1.2020.