Pound to Euro Exchange Rate Remains Lethargic Throughout the Holiday Season
Ever since the return of no-deal Brexit fears last week, the Pound Sterling to Euro (GBP/EUR) exchange rate has been unable to sustain much in the way of gains. A slightly more resilient Euro (EUR) has been keeping the limp Pound (GBP) lower.
Since opening this week at the level of 1.1736, GBP/EUR has trended lower as Brexit fears continue to weigh on Sterling.
GBP/EUR briefly dipped in the middle of the week to touch a two month low of 1.1483, but for most of the week has only been trending just below the level of 1.17.
At the time of writing on Friday morning though, GBP/EUR is trending in the region of 1.1700.
The Pound was a little more supported in quiet trade on Friday, but movement is limited as investors are eagerly anticipating the next phases of the Brexit process.
Pound (GBP) Exchange Rates Weighed as Brexit Uncertainty Dominates 2020 Outlook
Investors have been hesitant to buy the Pound since last week, when UK Prime Minister Boris Johnson revealed plans to outlaw an extension to the Brexit transition period.
When the UK leaves the EU in January, Britain will still observe major EU laws until the end of 2020 as negotiations for post-Brexit arrangement continue.
This is called the transition period and until recently many analysts believed it likely that it would be extended to ensure the UK government achieves a solid Brexit deal.
However, as the government’s Brexit bill passed with an amendment outlawing an extension, the Pound has slumped. Fears that 2020 Brexit negotiations could still end with a cliff-edge scenario have throttled the British currency.
Amid the festive holiday season, not much has changed for the Pound outlook in the past week. With markets anxious about how 2020 Brexit negotiations will unfold, the British currency remains under pressure.
Euro (EUR) Exchange Rates Supported by Hopes for Stronger 2020
The Eurozone economy has endured a sluggish 2019, with major parts of the Eurozone economy struggling, slowing or even contracting for much of the year.
As the US economy continued to see resilient economic performance, the US Dollar (USD) enjoyed strong performance for much of the year.
A combination of a slow Eurozone economy and strength in the US Dollar, the Euro’s biggest rival, left the Euro weak for much of the year as well.
However, there have been increasing signs over the past month that the Eurozone’s economic activity could finally have hit a bottom, and be showing signs of recovery.
There are also signs that the Federal Reserve could be more dovish than expected next year if the US economic outlook worsens.
These factors are making investors a little more positive on the Euro looking ahead, and this is helping the Euro to sustain gains against Sterling.
Pound to Euro (GBP/EUR) Exchange Rate Outlook Returns to Brexit and Eurozone Data Next Week
Next week will see 2019 draw to an end and 2020 begin. While a new decade may be beginning though, the Pound is likely in for another whole year of Brexit uncertainty and jitters.
Pound investors are eagerly awaiting further news on the sort of stance the UK government will be taking on Brexit throughout the coming year’s negotiations.
If there are signs that the government is looking for a cleaner split on Brexit, the Pound will be in for further weakness.
In the shorter term, next week’s data could also influence some movement in the Pound to Euro (GBP/EUR) exchange rate.
December’s final manufacturing PMIs will be published on Thursday and could cause some Pound movement if it surprises investors.
Euro investors are still looking for signs of recovery in the Eurozone economy, so next week’s Eurozone data is even more likely to be influential.
Monday will see the publication of 2019’s final noteworthy Eurozone stats, Germany’s November retail sales results.
This will be followed on Thursday by Eurozone manufacturing stats, and Friday’s French and German inflation rate figures for December could also drive the Pound to Euro (GBP/EUR) exchange rate.