EUR/GBP Exchange Rate Increases as Pound is Wracked by Political Uncertainty
The Euro Pound (EUR/GBP) exchange rate edged higher today and is currently trading around €0.8645 on the inter-bank market.
Sterling has struggled today on news that the UK and the EU remain in a deadlock over the Irish backstop, and with just one day ahead of the important parliamentary vote on Prime Minister Theresa May’s Brexit deal, this has left many Pound traders feeling skittish.
With Theresa May’s withdrawal agreement looking increasingly unlikely to pass through Parliament tomorrow due to a significant lack of support, this has seen the Pound weaken against most of its peers.
Many Pound traders are looking ahead to the possibility of the 13 March vote on a no-deal Brexit or an extension of Article 50, which will be voted upon on 14 March. Brexit uncertainty is continually ramping up, with fears that the EU may reject any significant extension if the UK fails to demonstrate consensus within the House of Commons.
Sam Gyimah, a former Conservative MP who originally resigned to back a ‘people’s vote’, commented:
‘The prime minister’s version is a similarly artificial choice: her deal, or a chaotic and disorderly exit from the EU that we know will have severe consequences for our communities. MPs are effectively being asked to choose between the frying pan and the fire, in the hope they will choose the former and that will somehow be declared as a victory.’
The Euro, meanwhile, rose against the Pound today despite the publication of the German industrial production figures for January coming in at a worse-than-expected -0.8% – against December’s 0.8% increase.
EUR/GBP Exchange Rate Rises despite Poor German Trade Balance Figures
Today also saw the release of the German trade balance figures for January which fell below the expected €21.0bn to €18.5bn.
Carsten Brzeski, an economist at ING, commented:
‘The start of the new year has hardly been any better for the German economy than the end of last year.’
Many EUR traders, however, will be focusing on today’s Eurogroup meeting. Although with recent indications that the Eurozone is slowing – and following the European Central Bank’s slashing of its 2019 forecast – it is likely that there will be some dovish comments, which could prove Euro‑negative.
EUR/GBP Forecast: Pound Could Fall if May’s Brexit Deal is Rejected
Euro investors are looking ahead to the Economic and Financial Affairs Council meeting tomorrow, which will focus on economic measures throughout the Eurozone. Any dovish comments about the state of the economy could prove negative for the single currency.
Tomorrow will also see the publication of the Spanish CPI figures for February, which are expected to decrease at -0.2%.
Sterling traders, however, will be focusing on Brexit developments ahead of the important UK parliamentary vote on Theresa May’s Brexit deal tomorrow, and with any signs that this could be voted down over complications over the Irish backstop, this could see the Pound plummet.