Monday morning’s rally in the GBP EUR exchange rate fizzled out by the afternoon as markets grew increasingly worried about the effects of Brexit.
Uptick in Pound Euro (GBP EUR) Slowed by Brexit Fears
The Pound slid against the Euro yesterday afternoon, cutting much of the day’s gains as businesses warned that they were already facing the pressures of Brexit.
A survey from business leaders at 100 of the country’s largest companies said that despite a surprising uptick in the UK economy since the EU referendum 58% of them are already starting to feel the pressures of the UK’s decision to leave the EU.
Meanwhile a survey from the British Chambers of Commerce has also found that half of SMEs are preparing to raise prices as the devaluation of the Pound has caused import costs to surge.
Investors fear that these issues are likely to persist over the next 12 months as the government begins to negotiate its exit from the EU, likely placing more pressure on Sterling.
Populism Fears Weigh on Euro
The Euro’s retreat earlier in the morning was largely prompted by the formal announcement of Marine Le Pen’s election campaign as it reignited market fears over the rise of populism across Europe.
Le Pen has vowed to hold a referendum on EU membership if her far-right National Front party wins the presidential election later this year, floating plans to form a new basket of currencies with other disillusioned EU nations such as Greece.
While current polls do not expect Le Pen to pass the second round of elections, investors are unlikely to soon forget the shock results of both Brexit and the US election and are likely to remain dovish towards the single currency ahead of the elections.
GBP EUR Exchange Rate Forecast: Article 50 Bill to Pass Through House of Commons
The GBP EUR exchange is likely to be closely tied to the outcome of the government’s Brexit bill this week as MPs are given the chance to amend the legislation as it passes through parliament.
The Pound could rise should MPs succeed in altering the bill, especially if it helps to hamper Prime Minister Theresa May’s plans to leave the single market in a ‘hard Brexit’.
Meanwhile the Euro may strengthen if Germany’s latest Industrial Production figures impress, with analysts predicting that production will rise from 2.2% to 2.5% in December.
Current Interbank Exchange Rates
At the time of writing the GBP EUR exchange rate was trending around 1.16 and the EUR GBP exchange rate was trending around 0.86.
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