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Pound Euro (GBP/EUR) Exchange Rate Sinks as Brexit Uncertainty Haunts UK Markets

European Central Bank

GBP/EUR Exchange Rate Falls as No-Deal Brexit Fears Return to Haunt UK Markets

The Pound Euro (GBP/EUR) exchange rate fell by -0.5% today, with the pairing currently trading around €1.166 as UK markets continue to react negatively to Prime Minister Boris Johnson’s Brexit ‘transition period’ time limit until December 2020.

Last week saw the British Prime Minister outlaw an extension to the UK’s implementation period for leaving the European Union, which has since left markets jittery on the prospect of a cliff-edge no-deal Brexit late next year.

Dean Turner, UK Economist at UBS Global Wealth Management, said that the UK’s market optimism would likely suffer in 2020. He said:

‘It’s possible that there will be some bounce in activity given the clarity on Brexit, but any improvement in sentiment is likely to fade as the next Brexit deadline draws closer.’

With no UK economic data releases until after Christmas, the GBP/EUR exchange rate has begun to fall as markets await further developments around Brexit ahead of the 31st January deadline in which the UK is due to leave the EU.

EUR/GBP Exchange Rate Rises as German Import Prices Beat Expectations

The Euro (EUR) climbed against the Pound (GBP) following better-than-expected German Import Price Index figure for November, which rose from -0.1% to 0.2% month-on-month.

Meanwhile, European markets remained upbeat after President Donald Trump’s positive comments over a possible US-China trade deal in the near-term.

With the Eurozone’s economy being heavily trade-reliant, any signs of improving relations between the world’s two largest economies would provide a boost to the bloc’s flagging economy, hence proving EUR-positive today.

Craig Erlam, a Senior Market Analyst at OANDA Europe, comments:

‘European stocks are trading slightly in negative territory at the start of the week, although there’s very little we can read into this, given the lower festive volumes and news flow. It’s been a good few week’s for investors, spurred primarily by the de-escalation in the trade war, with Trump only this weekend claiming it will be signed very shortly.’

GBP/EUR Outlook: US-China Trade Developments and Brexit in Focus

Brexit developments will continue to drive the GBP/EUR exchange rate into the New Year, with any signs of further strains on UK-EU relations over Boris Johnson’s new Withdrawal Agreement Bill proving Pound-negative.

Meanwhile, the Euro will continue to be driven by global economic and political developments around US-China trade talks. Any indications that the world’s two largest economies could secure a Phase One trade deal ahead of the New Year would boost the Euro.