The Pound Euro exchange rate has recently suffered due to rising uncertainties about the Brexit process, while Eurozone news seems set to focus on EU-US relations in the future.
GBP EUR Exchange Rate Weakened on Commons Vote; Article 50 Bill Sent Through
The biggest knock to the Pound of late came on February 2nd, when a trio of developments severely damaged Sterling demand and saw the Pound Euro exchange rate slump.
The first was actually an overhang from Wednesday, when MPs in the House of Commons approved the preliminary Article 50 bill, the first step towards Brexit proper.
As this represented the first official legislative step towards the UK-EU separation, confidence among investors crumbled. Thursday also brought the UK’s construction PMI for January, which dropped closer to the contraction range.
While the Bank of England (BoE) upgraded its growth forecasts for the coming years, investors were disappointed with the inflation rate predictions and remained wary that the next interest rate decision could be a cut as much as a hike.
Notable Eurozone news focused on rising manufacturing in January, as well as rising producer price indices in December. In the latter case, this boosted Euro demand as it pointed towards higher inflation in the future.
Less helpful were Friday’s retail sales, which remained negative on the month in December and slowed from 2.5% to 1.1% on the year.
Article 50 Official Trigger could Shatter Sterling Demand in March
The next big influencer on the Pound doesn’t have a precise date attached to it, but estimates have nonetheless narrowed the timeline down.
The event will be the actual Government trigger of Article 50, which is expected between March 7th and March 31st, based on a predicted smooth passage of the Article 50 bill through both Houses of Parliament.
When Article 50 is eventually triggered by Theresa May, a soft deadline of two years will be initiated for the UK to withdraw itself from the EU. This fact is expected to greatly worsen the Pound’s value and could actually trigger a crash, given the finality of such an event.
Euro Instability Expected if Trump Administration Causes EU-US Trade War
For the Euro, the potential for a protracted EU-US trade war is likely to influence EUR demand in the future, especially if an unexpected breakdown in relations takes place.
One of Donald Trump’s top advisors, Peter Navarro, recently claimed that Germany has been manipulating the Euro, which lowered confidence in future relations, while on February 3rd, EU leaders lined up to criticise Trump’s fledgling presidency.
If these animosities continue, then the Euro could well slump in demand, given that an economic deterioration between the two areas would be a greatly concerning development for Euro investors in particular.
Recent Interbank GBP EUR Exchange Rates
At the time of writing, the Pound Euro (GBP EUR) exchange rate was trending in the region of 1.16 and the Euro Pound (EUR GBP) exchange rate was trending in the region of 0.85.
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