Pound to Euro Exchange Rate Fails to Find Fresh Support in Thursday’s Brexit News
While market fears of a no-deal Brexit have lightened significantly this week and UK Parliament voted to delay the Brexit process as expected, the Pound Sterling to Euro (GBP/EUR) exchange rate has been unable to hold its best levels.
Hopes for a no-deal Brexit to be avoided have been enough to help GBP/EUR to secure solid gains, but as uncertainty remains the pair has only climbed from 1.1585 by around a cent, to 1.1685.
GBP/EUR has been unable to hold its weekly high of 1.1774. This was also the best GBP/EUR level in over a year, since 2017.
After this week’s major developments, Pound investors are hesitant to buy the currency much higher as they await more major news that now expected next week.
Could next week see the UK government’s Brexit deal finally pass? This would have a significant impact on the Pound to Euro exchange rate outlook.
Pound (GBP) Exchange Rates on Track for Strong Gains despite Latest Slip
Despite market demand for the Pound slipping slightly towards the end of the week, the British currency was still on track to see a week of strong gains overall due to how bullishly the currency benefitted from fading no-deal Brexit bets.
In the middle of the week, UK MPs voted in Parliament to reject the idea of Britain ever seeking a no-deal Brexit under any circumstances.
This strong rejection of no-deal Brexit revealed the lengths that MPs would go to in order to prevent a no-deal Brexit, and Pound demand surged as a result. This was despite the government’s soft Brexit plan being blocked for a second time.
On Thursday, MPs also voted to delay the formal Brexit date as expected.
However, MPs also rejected an amendment that would allow Parliament to take control over the Brexit process, dampening hopes for a softer Brexit.
This on top of uncertainty over how the third meaningful vote on Brexit will turn out, as well as uncertainty over whether the EU would even allow a Brexit delay, left the Pound’s demand a little weaker before markets closed for the week.
Euro (EUR) Exchange Rates Benefit from Rival Weakness
Investors have not had much reason to buy the Euro (EUR) over the past week, but it has pushed GBP/EUR away from its weekly highs regardless due to weakness in the Euro’s rivals.
As well as the Pound’s own limp performance at the end of the week, investors have been selling the US Dollar (USD) in recent sessions as the US economic outlook shows signs of being hit by the slowing global economy.
As the Euro is the US Dollar’s biggest rival, Euro demand was a little stronger due to the negative correlation the currencies share.
This morning’s Eurozone data helped the Euro to hold its ground and avoid losses against Sterling today. German wholesale prices remained steady month-on-month and improved from 1.1% to 1.6% year-on-year.
Pound to Euro (GBP/EUR) Exchange Rate Outlook Depends on Brexit Developments
The chaotic nature of the Brexit process this year so far doesn’t look like it will let up just yet, though some more mid to long-term answers may be just on the horizon.
With a mere two weeks until Britain is due to formally exit the EU, market focus will turn to how the UK government will negotiate the delay of Brexit with the EU.
The government is aiming for a short Brexit delay, but officials in the EU have indicated that it would prefer a long delay of as much as two years.
The government is also planning on holding another meaningful vote on its Brexit plan next week.
There is speculation that the threat of Brexit being delayed for two years could pressure more Brexit supporters to vote for May’s deal and potentially help it to pass next week – which would lead to the government’s soft Brexit and cause a boost in Pound demand.
Brexit votes and developments will remain in focus next week, but upcoming Eurozone confidence data and PMI projections could also influence the Pound to Euro (GBP/EUR) exchange rate next week.
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