Euro to Pound Exchange Rate Slumps as No-deal Brexit Fears Lighten
Amid a lack of reasons to buy the Euro (EUR), as well as this week’s Brexit developments so far, the Euro to Pound Sterling (EUR/GBP) exchange rate has plummeted to near its worst levels in over a year this week.
After opening this week at the level of 0.8680, EUR/GBP slumped then extended its losses on Tuesday. EUR/GBP has lost around a pence so far, trending close to the level of 0.8580 at the time of writing.
EUR/GBP touched on a fresh 2019 low of 0.8567 on Tuesday evening – which also happened to be the worst EUR/GBP level since May 2017.
Rising hopes that a No-deal Brexit can be avoided have bolstered demand for the Pound (GBP), which has gained more easily due to the Euro’s weakness. The Euro is being weighed by poor Eurozone ecostats.
Euro (EUR) Exchange Rate Outlook Damp with Eurozone Data Weak
Part of the reason the Pound has pushed the Euro to its worst levels in over a year is that the Euro’s outlook is weak, and there are currently few signs that that will change soon.
Recent Eurozone data has continued to indicate that the bloc’s economy is slowing down, with German data continuing to print short of expectations.
This week’s Eurozone data has done little to change that so far. Germany’s March consumer confidence stats from GfK printed at 10.8 as expected on Tuesday, while French consumer confidence slightly beat expectations.
With markets still predicting that the Eurozone economic slowdown will last longer than previously expected, the Euro has been reacting more to movement in rivals than strength in Eurozone data.
Brexit optimism, combined with lingering demand for safe havens boosting the Euro’s rival, the US Dollar (USD), have left the Euro limp.
Pound (GBP) Exchange Rate Outlook Surges on Bets against No-deal Brexit
With just over a month to go until the UK is set to formally leave the EU, some small shifts in direction over Brexit from the UK government and opposition Labour Party have been welcomed by markets.
Sterling surged on Tuesday amid bets that the government was considering formally delaying the Brexit process.
While the government’s actual plan for the next step in Brexit was different to market expectations, Sterling still held most of its gains versus weaker rivals like the Euro.
The government announced that if its Brexit deal is blocked in Parliament again, it will ask Parliament whether it is for or against a No-deal Brexit. If Parliament votes against a No-deal Brexit it will be given a vote on a small extension of Article 50.
While this small extension was not what markets hoped for and to some amounted to ‘kicking the can’, investors were relieved that the government’s vote plans were welcomed across parties.
This made investors more hopeful that a No-deal Brexit could be avoided, bolstering the Pound outlook.
Euro to Pound (EUR/GBP) Exchange Rate Outlook to be driven by Brexit News and Eurozone Data
The Brexit process will return to UK Parliament today, for another session of debate.
While no major developments or changes to the process are expected, if any tabled amendments gain enough ground to make an impact on the direction of Brexit the Pound is likely to have a strong reaction.
For example, if any support for a second referendum of some kind rises, the Pound is likely to surge and push EUR/GBP even lower.
As for the Euro, it is unlikely to see much strength versus an appealing Pound unless some upcoming Eurozone data impresses investors.
Thursday will see the publication of key stats including French and German inflation rates, followed on Friday by German unemployment, Markit’s Eurozone manufacturing PMIs and the Eurozone’s February inflation projections.
Unless Eurozone data impresses investors in the coming days, the Euro to Pound (EUR/GBP) exchange rate is unlikely to recover much of its recent losses.