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Pound Euro (GBP/EUR) Exchange Rate Eases as Brexit Uncertainties Rise Ahead of Boris Johnson’s Europe Visit

GBP/EUR Exchange Rate Falls as UK-EU Brexit Talks Breakdown

The Pound Euro (GBP/EUR) exchange rate eased to €1.093 this morning, as Brexit uncertainty rises ahead of Prime Minister Boris Johnson’s visit to European leaders later on today.

Following Boris Johnson’s letter to the European Council requesting the scrapping of the Irish backstop, Mr Johnson has come under increasing criticism for neglecting constructive proposal with the European Union.

Norbert Röttgen, the Head of the German Parliament’s Foreign Affairs Committee, said:

‘The British prime minister starts his letter by saying he is personally committed to finding an agreement, but there is no sign in the rest of the letter that this is actually the case… If Johnson really wanted to achieve something on his visits to Paris and Berlin, he would have been well advised against writing this letter.’

German Chancellor Angela Merkel is not expected to change her stance on Brexit upon Boris Johnson’s visit today.

Nicolai von Ondarza, a Political Scientist at the thinktank SWP, commented:

‘If Germany and France gave in now, it would send the fatal signal that the two biggest members states are willing to sell out smaller states for short-term economic interest.’

Meanwhile, today saw the publication of the UK public sector net borrowing figure for July, which fell from £5.672 billion to £-1.971 billion.

EUR/GBP Exchange Rate Rises despite Italian Political Uncertainty

The Euro (EUR) edged higher against Sterling today despite yesterday’s resignation of Italy’s Prime Minister Giuseppe Conte amid heightened coalition tensions between the League and the 5-Star Movement.

Euro traders are becoming increasingly jittery that Deputy Prime Minister Matteo Salvini – a Eurosceptic – could gain increasing prominence in the government, which would further heighten the likelihood of Italy’s leaving of the EU.

However, German Finance Minister Olaf Scholz said that there is ‘no sign’ that there is no sign of a Eurozone crisis over Italy’s political upheaval.

He said:

‘[I]t looks as if a new government, perhaps with a different composition, will emerge.’

Brexit is also remaining in focus for European currency investors today.

Any indications that the EU could compromise with the UK over the withdrawal agreement could bolster market confidence in the single currency.

GBP/EUR Outlook: German Manufacturing PMI in Focus

Euro investors will be looking ahead to tomorrow’s publication of the flash German Markit Manufacturing PMI for August.

As these are forecast to fall deeper into contraction, we could see the European currency lose some of its gains against the Pound.

The Pound Euro exchange rate is likely to remain subdued this week as UK-EU Brexit negotiations are showing no signs of progression on securing a withdrawal agreement.