Pound to Euro Exchange Rate Selloff Continues amid Persistent Political Jitters in Britain
Despite a lack of particularly influential UK ecostats this week, the Pound Sterling to Euro (GBP/EUR) exchange rate continued to slide on Wednesday as ‘no deal’ Brexit jitters persisted and fissures within the UK government hit headlines.
While GBP/EUR’s movement was tight and limited last week, this week has seen GBP/EUR experience a solid drop so far.
Since opening the week at the level of 1.1238, GBP/EUR has lost around a cent. At the time of writing on Wednesday morning, GBP/EUR trended near a low of 1.1134 – the pair’s lowest level since October 2017.
The Euro (EUR) was supported slightly this week by a weaker US Dollar (USD) and signs that Germany’s economy has not been effected as strongly by US trade protectionism so far as feared.
However, the main reason for the Pound to Euro (GBP/EUR) exchange rate’s losses this week has been Brexit fears, as markets become more concerned that Britain could leave the EU without securing a deal.
Pound (GBP) Exchange Rates Continue to be sold as Brexit Fears Worsen
Brexit uncertainties and UK political tensions have been dominating headlines again this week, taking market focus away from the Bank of England’s (BoE) monetary policy outlook and back onto the Brexit process.
With the UK set to formally leave the EU in March 2019, the large number of remaining uncertainties and lack of concrete deal news is making investors concerned about Britain’s economic outlook.
Markets are becoming increasingly anxious about the seemingly real possibility that Britain could leave the EU without any kind of trade deal.
A ‘no deal’ Brexit is seen as a worst-case scenario and would leave many businesses and services with a huge struggle in post-Brexit Britain. Some UK officials have said since last week that a ‘no deal’ Brexit is becoming more likely.
On top of this, tensions within UK Prime Minister Theresa May’s Conservative government have been making investors anxious too, as May has called on MP Boris Johnson to apologise for controversial claims he made on Tuesday.
Euro (EUR) Exchange Rates Remains Appealing as Trade Jitters Lighten
Demand for the Euro has strengthened in recent sessions and the currency’s outlook has improved slightly too, as investor fears about the possibility of US trade protectionism having a big impact on Germany’s economy lightened somewhat.
While Monday’s German factory orders data showed a shocking contraction and Tuesday’s German trade and industrial production stats were underwhelming too, some analysts perceived the sudden fall in German activity as a blip.
On top of this, US-Eurozone trade talks have been largely amicable in recent weeks and this has softened concerns about trade tensions between the regions.
Analysts predict that German economic activity could steady in the coming months and trade fears are expected to take a backseat in Euro movement, so the shared currency was able to easily climb against a weak Pound.
Pound to Euro (GBP/EUR) Forecast: UK Growth Results May Take Backseat to Brexit Fears
The UK and Eurozone economic calendars will be relatively quiet until Friday, when key UK Gross Domestic Product (GDP) data will be published.
Friday’s slew of UK ecostats includes UK growth results from June, Q2 growth figures, industrial and manufacturing production stats from June and Q2’s business investment stats.
However, with ‘no deal’ Brexit concerns taking so much focus for Pound investors this week, even an impressive UK growth report may not have a particularly bullish effect on the Pound.
Even if UK growth comes in well above expectations, investors are more anxious about the coming months and the lead-up to the formal Brexit in March, as ‘no deal’ Brexit fears persist.
The Euro, on the other hand, is likely to remain relatively resilient – at least unless there are concerning US trade developments, or if next week’s Eurozone growth projections and July inflation figures disappoint
As a result, the Pound to Euro (GBP/EUR) exchange rate forecast could remain lower unless there are any optimistic developments in the Brexit process in the coming sessions.