Pound to Euro Exchange Rate Fails to Hold Highs as UK Parliament Vote Awaited
Yesterday was a highly eventful one for forex markets and the Pound Sterling to Euro (GBP/EUR) exchange rate, as the UK and EU announced they had agreed to a new Brexit deal in time for the EU Summit.
GBP/EUR movement was very volatile and mixed throughout the day. GBP/EUR briefly touched on a 5-month-best of 1.1633 when the deal was confirmed, but the pair quickly retreated again due to concerns about how popular the deal would be.
At the time of writing on Friday morning, GBP/EUR is trending near the level of 1.1565.
Unless hopes for the deal passing collapse at some point today, GBP/EUR is on track to end the week around a cent above the week’s opening levels of 1.1463.
Pound (GBP) Exchange Rates Fall Back from Best Levels amid UK Parliament Concerns
With mere weeks to go until the current 31st of October Brexit deadline, the UK and EU finally agreed on a new Brexit deal yesterday.
UK Prime Minister Boris Johnson and European Commission President Jean-Claude Juncker both appeared happy and confident with the deal and this briefly led to a surge of demand for the Pound.
However, the deal’s real battle could still be ahead. The deal negotiated by the previous Theresa May government was blocked three times in UK Parliament, and there are concerns that this new deal is even less acceptable to MPs.
The opposition Labour Party has already said it will oppose the deal in an upcoming parliamentary vote on Saturday.
What’s more, the government doesn’t appear to have gotten Northern Ireland’s DUP Party on board. The DUP has been a key ally in helping the government to reach parliamentary majority in recent years.
European Commission President Juncker has said that the EU is not planning on granting Britain another extension to the Brexit process. However, if the deal is blocked on Saturday, that could change.
Euro (EUR) Exchange Rates Lack Support, Driven by Rivals
For the Euro (EUR), on the other hand, it hasn’t been a hugely eventful week. The latest Eurozone data continues to indicate that the bloc’s economy is suffering from slowdown, especially Germany’s economy.
Eurozone inflation data fell short of projections and construction output was also weaker than expected. Overall investors still have little reason to be optimistic about the Eurozone economic outlook.
Despite this though, the Euro has held its ground slightly against the Pound.
As the Eurozone will be impacted by Brexit as well, the announcement of a Brexit deal has supported the Euro as well. This has made it easier for the Euro to push the Pound lower in times of Pound weakness.
The US Dollar (USD), which is the Euro’s biggest currency rival, has also seen regular weakness in recent sessions.
Pound to Euro (GBP/EUR) Exchange Rate Outlook Awaits UK Parliament’s Brexit Vote
A new Brexit deal has been reached, but it still needs to pass through UK Parliament for a softer Brexit to happen. For the time being, analysts aren’t very hopeful about its chances.
The government lacks the support of key allies in the DUP Party, and there is speculation that some members of the government’s Conservative Party may also vote against the deal.
Without this support let alone the support of opposition parties, the government could be well short of the majority it needs to pass the deal through parliament on Saturday.
While passing the deal is already seen as fairly unlikely, the Pound may still be in for big losses when markets reopen on Monday. It would lead to fresh uncertainty less than two weeks before the 31st of October deadline.
If the UK government attempts to aim for a no-deal Brexit in this scenario, the Pound could fall even further.
With Brexit in focus, the Euro may not influence the GBP/EUR outlook too much in the coming sessions. Next week’s Eurozone PMIs could bolster the Euro outlook and weigh on the Pound to Euro (GBP/EUR) exchange rate slightly if they impress though.