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Pound Sterling to Euro Exchange Rate Outlook Hazy as Boris Johnson Expected to become Conservative Leader

Pound to Euro Exchange Rate Slides as Brexit Fears Overshadow European Central Bank Bets

While the presumed results of Britain’s Conservative Party leadership contest have already been priced in, the Pound Sterling to Euro (GBP/EUR) exchange rate has continued to trend with a downside bias since markets opened yesterday.

GBP/EUR slipped from 1.1158 to 1.1142 last week, after recovering from the week’s brief 2019 worst level of 1.1053.

After markets opened yesterday, GBP/EUR has seen more modest slips as the Euro (EUR) has been too weak to properly capitalise on Sterling (GBP) losses. GBP/EUR trended closely to the level of 1.1119 at the time of writing.

The Pound outlook is marred by fears that a no-deal Brexit is becoming more of a possibility, while the Euro is unappealing on European Central Bank (ECB) interest rate cut bets.

Pound (GBP) Exchange Rates Slipping as Markets Anticipate Results of UK Leadership Contest

Since UK Prime Minister Theresa May’s resignation in late-May, the ruling Conservative Party has been undergoing the process of choosing a successor.

Today, the results of the leadership contest are expected to be announced. Brexiteer Boris Johnson is widely priced in to be the victor, and this is keeping the Pound lower.

Johnson’s leadership is being perceived by markets as a negative, due to his harder stances on Brexit and his continued hints that he could aim for a worst-case scenario no-deal Brexit over a delay to the process.

Building no-deal Brexit fears have been the primary cause of Pound weakness in recent months, and currency analysts predict that a Johnson leadership could mean the worst is still ahead for the embattled British currency.

Euro (EUR) Exchange Rate Advances Limited as European Central Bank Speculation Persists

The Euro struggled to sustain gains, even versus a weak Pound, as investors were hesitant to move much on the shared currency ahead of Thursday’s anticipated European Central Bank (ECB) policy decision.

Recent Eurozone data has been mixed, but German data in particularly has indicated that the Eurozone’s biggest economy is still struggling from months of slowdown.

As a result, European Central Bank easing speculation has persisted. Markets are betting that the ECB will cut Eurozone interest rates in September, with some betting that there could be more than one rate cut.

More quantitative easing (QE) is also being speculated. Expectations for a dovish tone from the bank are keeping pressure on the shared currency’s outlook today.

Pound to Euro (GBP/EUR) Exchange Rate Focused on UK Politics and European Central Bank (ECB) Bets

The Pound to Euro (GBP/EUR) exchange rate’s movement is limited, with investors too focused on major upcoming news to want to make big moves on the pair.

Perhaps the biggest event for Pound investors this week will be the announcement of the victor of the Conservative Party leadership contest.

There is speculation that there could be significant resignations from the government cabinet in the event that Boris Johnson becomes leader, as well as cabinet reshuffles.

These have the potential to influence the Pound, as the new government takes shape over the coming days and could influence how the Brexit process may unfold.

Euro investors, on the other hand, will be focused on European Central Bank (ECB) easing speculation and bets.

ECB bets could be influenced by upcoming Eurozone ecostats, including the Eurozone’s July consumer confidence results later today, and Markit PMI projections tomorrow.

Of course, Thursday’s European Central Bank (ECB) policy decision will be the biggest event for the Euro this week and could have a big influence on the Pound to Euro (GBP/EUR) exchange rate.