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Euro to Pound Sterling Exchange Rate Continues to Climb as Brexit Sours UK Outlook

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Euro to Pound Exchange Rate Climbing Closer to Week’s Opening Levels

A rebound in the Pound (GBP) earlier in the week pushed the Euro to Pound Sterling (EUR/GBP) exchange rate to multi-week lows, but lingering concerns about the Brexit process, as well as hopes for Eurozone economic recovery, are keeping the pair’s outlook higher.

Since opening this week at the level of 0.8542, EUR/GBP has trended lower due to the Pound’s rebound before the New Year.

This pushed EUR/GBP to a fortnight low of 0.8437, which the pair has since recovered from. At the time of writing on Friday, EUR/GBP has recovered most of its weekly losses and trends in the region of 0.8512.

Still, unless upcoming German inflation data is particularly strong or the Euro’s rival the US Dollar (USD) weakens again, the Euro to Pound exchange rate’s potential for gains will be limited.

Euro (EUR) Exchange Rate Gains Limited by Rival Strength

The Euro has been gradually climbing since the new year and this has seen it register gains against a weakening Pound.

However, a lack of particularly strong Eurozone ecostats, as well as fresh rebounding strength in the Euro’s rival the US Dollar (USD), limited the Euro’s appeal and slowed its advances.

Yesterday’s Eurozone manufacturing PMI stats beat forecasts slightly, but still showed that broad weakness remained in the Eurozone factory sector.

Today, the Euro struggled to capitalise on some stronger than expected French inflation rate data due to a stronger US Dollar (USD). The safe haven US Dollar is advancing on geopolitical jitters, amid fresh military escalation between the US and Iran.

Pound (GBP) Exchange Rates Under Pressure on Speculation of Further Brexit Uncertainty

In the final sessions of 2019, the Pound experienced a jump in demand. Investors piled into the British currency in rebound from its lows following weeks of losses on fresh Brexit jitters.

Many analysts still believe the chances of a no-deal Brexit have softened since Britain’s 2019 General Election, and this is keeping the Pound supported from falling too far.

However, as Britain will finally leave the EU at the end of January, and another year of Brexit negotiations is expected before the transition period ends at the end of 2020, Brexit uncertainty is likely to remain a big focus for Sterling.

On top of Brexit uncertainties, the Pound outlook is also weak on UK economic uncertainty. Yesterday’s UK manufacturing PMI from Markit came in with a deeper than expected contraction of 47.5.

Euro to Pound (EUR/GBP) Exchange Rate Awaits Slew of Influential Eurozone Ecostats

The Euro to Pound (EUR/GBP) exchange rate has seen limited demand overall in recent sessions, but could see stronger demand going forward if the Eurozone outlook improves.

Analysts are increasingly speculating that the Eurozone economy is showing signs of recovery. If next week’s slews of Eurozone data, including Eurozone inflation, retail and confidence stats beat expectations, they could boost Euro demand.

German construction, factory and trade results could also be highly influential if they surprise investors.

However, even if upcoming Eurozone data beats expectations, investors may be hesitant to buy the Euro if its rival the US Dollar (USD) continues to strengthen on risk-aversion.

The Pound, on the other hand, will continue to be influenced by Brexit news and speculation.

Unless it is particularly surprising, Monday’s UK services PMI data may not have much impact on the Euro to Pound (EUR/GBP) exchange rate.