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Pound Euro (GBP/EUR) Exchange Rate Eases, British Consumers ‘Tread Water’ Ahead of Brexit

European Central Bank

GBP/EUR Exchange Rate Falls as Brexit Uncertainty Weighs on UK Markets

The Pound Euro (GBP/EUR) exchange rate eased to around €1.1247 today, despite September’s UK GfK consumer sentiment index beating forecasts and rising from -14 to -12.

Joe Staton, Client Strategy Director at GfK, was cautious, however:

‘This month, British consumers appear to be treading water during this wait-and-see run-up to 31 October… We certainly have a long way to go to match the record low headline score of -39 witnessed during the early days of the last recession. But will it stay that way? You can almost sense people are keeping their fingers crossed.’

However, Sterling struggled against the Euro after former Conservative Prime Minister John Major warned that Downing Street could subvert the Benn act via the Privy Council.

Mr Major said:

‘My fear is that the government will seek to bypass statute law, by passing an order of council to suspend the act until after 31 October.’

As a result, no-deal Brexit fears continue to put downward pressure on Pound sterling today.

EUR/GBP Exchange Rate Improves despite Sinking Eurozone Business Confidence

The Euro (EUR) edged higher on the struggling Pound today despite the Eurozone’s business climate index for September sinking below forecast from 0.12 to -0.22 – a five-year low.

Analysts at Reuters commented:

‘Eurozone economic sentiment plunged in September as trade tensions depressed confidence in industry… although morale improved in services, dispelling concerns of spillover to the bloc’s largest economic sector.’

However, the Eurozone’s economic data is having little effect on the European currency as the high odds for the European Central Bank’s (ECB) further monetary loosening have already been drawn up, leaving markets focusing on wider global economic and political developments instead.

The Euro has also benefited from US political uncertainty with President Donald Trump facing the possibility of impeachment after pushing President of Ukraine, Volodymyr Zelensky to investigate his political rival, Joe Biden.

With political uncertainty wracking the United States, some traders have fled to the safe-haven Euro instead, thus bolstering the EUR/GBP exchange rate today.

GBP/EUR Outlook: Sterling Could Improve if Parliament Challenges Hard-Brexit

Euro traders will be looking ahead to Monday’s publication of September’s flash German inflation figure. As it is expected to improve from 1% to 1.2%, we could see the EUR/GBP exchange rate edge higher.

Monday will also see the publication of German jobs figures for September.

Meanwhile, Sterling investors will be keeping a close eye on Monday’s release of the UK’s Q2 growth figure, which is expected to rise from -0.2% to 0.5%.

Brexit developments will continue to direct the GBP/EUR exchange rate next week, and with any signs of a parliamentary challenge to the Conservative Party’s hard-Brexit stance, we could see the Pound rise as UK markets heave a sigh of relief.